Alphabet posts quarterly loss as AI spending drives cash burn, shares tumble
Alphabet missed profit and revenue forecasts, reporting a $9.07 billion free-cash-flow deficit and a 25% drop in net income, while AI-related capital spending accelerated.
Alphabet Inc. reported a quarterly loss that fell short of Wall Street expectations, with free cash flow turning negative at $9.07 billion, compared with analysts’ forecasts for near-breakeven results. Revenue for the third quarter reached $127.6 billion, missing the consensus estimate of $128.2 billion, driven by an advertising shortfall of about $1.41 billion.
Chief Financial Officer Anat Ashkenazi said AI-driven capital expenditures will rise sharply in 2027, while the current year’s capex outlook remains unchanged. She added that near-term margin pressure is expected from reliance on third-party cloud capacity.
"We are again leading at the frontier," CEO Sundar Pichai told analysts during the earnings call, referring to the launch of the Gemini 4 Carbon model.
The company’s operating income fell by $7.66 billion in Alphabet-level activities, reflecting costs tied to AI research and development. Net income available to common shareholders declined 25% to $26.17 billion, and adjusted earnings per share of $2.67 missed the $3.02 target.
Google Cloud’s revenue more than doubled to $30.71 billion, surpassing estimates, but it was insufficient to offset the advertising weakness. Cloud chief Thomas Kurian, appearing on the earnings call for the first time, highlighted growing sales of Google’s tensor processing units as a meaningful revenue contributor.
Industry analysts note that Alphabet, alongside Microsoft, Amazon and Meta, is expected to spend over $700 billion in 2026 on AI data-center expansion, chips and networking, amid ongoing supply constraints for advanced silicon and power.