Alphabet Falls 12.6% as AI Spending Overtakes Cash Flow

Alphabet shares fell 12.6% on Thursday, closing at $283.82, after a third-quarter report showed capital spending running well ahead of the cash the business threw off. It was the stock’s steepest one-day decline since the company went public in 2004.

The numbers up top were strong. Revenue reached $127.6 billion, up 25% from a year earlier. Google Cloud more than doubled, rising 103% to $30.7 billion, and Google Search and other advertising brought in $63.35 billion, a 12% gain. Operating income climbed to $40.6 billion, a 31.8% margin. Chief executive Sundar Pichai said the company’s AI investments are driving overall Search query growth, including commercial queries.

The spending bill grew faster than the revenue

The worry sat lower in the statement. Alphabet spent $51.4 billion on property and equipment in the quarter, more than the $42.3 billion its operations produced in cash. That gap pushed free cash flow negative for the period. Operations still produced plenty of cash; the capital budget simply outran it. On the earnings call, management said capital spending would climb again in 2027, building on a 2026 range the company has guided to $195 billion to $205 billion.

So the market got a quarter where the growth was real and the cost of that growth was rising faster. Cloud at triple-digit growth is the payoff case for the buildout, and the cash statement is the bill that comes with it.

The $8.2 billion that pulled profit lower

Net income told a murkier story. Alphabet reported $26.2 billion in profit available to common shareholders, or $2.12 a share, down 26% from a year earlier. Operating income itself rose 30%, so the profit decline came entirely from below the operating line. The drop traced to an $8.2 billion charge in other income, most of it an $8.66 billion loss on equity securities the company holds, a line that sits apart from the advertising and cloud businesses. Set that mark aside and adjusted profit still came in below Wall Street’s expectations, according to analysts surveyed by LSEG. Revenue edged just under the consensus estimate as well.

A fresh low after a long slide

The selloff landed on an already weak chart. Even before Thursday, the stock had fallen more than 17% over the prior month. The close left it about 25% below its 90-day high of $377.65 and under the floor of its 90-day range, a fresh multi-month low. Volume did the rest. More than 139 million shares traded, over five times the 20-day average. By widely cited tallies, the one-day move erased roughly $500 billion in market value, the largest single-session loss in the company’s history.

The 2027 number nobody gave

For now, Alphabet held its 2026 capital-spending range in place and declined to put a figure on 2027 beyond saying it would be higher. That number is the next thing to watch. The company reports fourth-quarter and full-year results early next year, and investors will be looking for it. Cloud growth above 100% gives the outlay a rationale. The cash flow has yet to follow.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.