Alphabet, the parent company of Google, experienced a significant drop in market value, losing approximately $500 billion, following the release of its third-quarter 2026 financial report, which revealed profits below expectations. The company’s net profit was reported at $26.2 billion, marking a 25% decrease from the same period last year. Earnings per share stood at $2.12, failing to meet market predictions.
Despite the profit decline, Alphabet’s revenue rose by 25% year-on-year to $127.6 billion, although it still fell slightly short of forecasts. Advertising, a crucial revenue stream for the company, showed signs of slowing growth. Revenue from advertising increased 11% to $82 billion, while Google Search revenue grew 12% to $63.4 billion. YouTube’s advertising revenue increased by 9% to $11.2 billion, a slower growth rate compared to the previous quarter.
In contrast, Google Cloud posted impressive results, with revenue surging 103% to $30.7 billion. This growth was driven by a rise in demand for cloud computing services and AI infrastructure, alongside Google’s in-house Tensor Processing Units (TPUs). The operating income for the cloud division tripled to $11.1 billion, underscoring the growing significance of cloud services in Alphabet’s business strategy.
Alphabet is investing heavily in its AI initiatives, particularly in expanding its AI chip business to meet the rising demand from companies developing advanced AI systems. The company spent $51.4 billion on capital expenditures in the third quarter, more than double the $24 billion spent a year earlier, with investments primarily directed towards data centers, AI chips, and related infrastructure.
The company anticipates capital expenditure to reach between $195 billion and $205 billion in 2026, with further increases expected in 2027. These investments highlight Alphabet’s effort to bolster its position in the competitive AI market, facing pressure from rivals such as OpenAI and Anthropic. Alphabet’s AI initiatives are gaining traction, with the Gemini application reaching one billion users and Google’s AI models processing significantly more information than a year ago.
However, Alphabet’s investment portfolio experienced an $8.7 billion loss on equity investments, contributing to the pressure on quarterly profitability. The latest financial results underscore the challenges Alphabet faces in balancing its established advertising business with costly AI investments. While strong cloud revenue and growing AI adoption offer potential for future growth, the slowing momentum in advertising and rising infrastructure costs have sparked concerns about the speed at which these investments will yield sustainable returns.