Nasdaq Drops Over 1% After Alphabet’s Disappointing Earnings Report
The Nasdaq fell more than 1% after Alphabet reported drops in income and cash flow, reviving fears about AI spending.
The Nasdaq Composite index declined by more than 1% following Alphabet’s third-quarter earnings report, which raised concerns over the company’s spending on artificial intelligence.
Shares of Alphabet dropped over 10% after the company reported a net income of $26.17 billion, a significant decrease from $34.98 billion a year earlier. The earnings per share also fell from $2.87 to $2.12, marking Alphabet’s first revenue miss in nearly four years.
According to analysts, the company’s free cash flow showed a troubling negative figure of $9.07 billion, compared to expectations of negative $2.70 billion. Alphabet’s capital expenditures totaled $51.36 billion for the quarter, falling short of the $55.09 billion anticipated by analysts. Finance Chief Anat Ashkenazi stated, “We continue to expect our capex to increase significantly in 2027.”
In a shift, Alphabet’s long-term debt surged to $125.1 billion from $21.6 billion a year ago, indicating a drastic increase of about 479%. The company’s operating income also missed expectations, totaling $40.58 billion against a forecast of $43.19 billion.
Amid these financial setbacks, Alphabet’s cloud division performed well, reporting revenue growth to $30.7 billion, exceeding the expected $28.7 billion. Google Cloud CEO Thomas Kurian noted, “We are seeing extraordinary demand and strong growth from both AI labs, capital markets, financial service institutions, and enterprises.” The cloud segment’s growth, however, could not offset the negative sentiment surrounding the overall earnings results.
Analyst Brent Thill remarked, “The cloud business was the only business that beat at 103% growth,” but stated the overall performance fell short of high expectations.
Although Alphabet’s AI initiatives are showing signs of adoption, such as its Gemini app reaching 1 billion users, skepticism remains about the sustainability of such spending amid declining profitability. CEO Sundar Pichai acknowledged strong demand for the new Argon Gemini model, emphasizing its competitive edge in various domains.
Sources
Bhupendra Singh Chundawat is a seasoned technology journalist with over 22 years of experience in the media industry. He specializes in covering the global technology landscape, with a deep focus on manufacturing trends and the geopolitical impact on tech companies. Currently serving as the Editor at Udaipur Kiran, his insights are shaped by decades of hands-on reporting and editorial leadership in the fast-evolving world of technology.