Google Cloud’s staggering 103% growth won’t be enough for Alphabet’s (GOOGL) bulls in the wake of the results.
Alphabet shares fell 10% in pre-market trading Thursday after a third quarter that could be described as a disappointment.
The street is locked on two aspects of the neighborhood.
First, Google’s search business reported revenue of $63.4 billion, lower than the expected $64.9 billion. This failure fueled fears that Google’s search empire would be eaten away by companies like Claude and ChatGPT, despite Google’s massive investments.
Second, Google reported negative free cash flow of $9.1 billion, compared to Wall Street’s estimate of $3.5 billion. In a market worried about negative free cash flow at Big Tech (see the reaction to Meta (META) results last week, when it also had negative free cash flow for the first time in years), Google’s impression hurt.
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Closing: October 28 at 4:00:01 p.m. EDT
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“The bears will say this is the first quarter where AI is starting to seriously hurt their search business and perhaps YouTube is facing content monetization issues. Our view is that there is clearly an effect of consumers interacting with less advertising when they go to Google Search and use Google’s AI (1 billion users and AI queries hit a 5-year high) as Google moves to an AI world and inevitably AI agents,” said Jeffrey Wlodarczak, CEO of Pivotal Research.
Overall, Alphabet pulled off a rare double miss in its third-quarter earnings report, posting revenue of $127.57 billion compared to Wall Street’s consensus estimate of $128.2 billion.
The final results disappointed considerably as earnings per share fell to $2.12, significantly missing analysts’ forecasts of $3.02 per share.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team.
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