Alphabet Q3 Earnings Miss Forecasts Despite Google Cloud Doubling to $30.7 Billion

Alphabet Q3 Earnings Miss Forecasts Despite Google Cloud Doubling to $30.7 Billion

Google parent Alphabet has reported third-quarter revenue of $127.6 billion, up 25% from a year earlier, but the result still fell short of Wall Street expectations and sent its shares down more than 7% in after-hours trading. Earnings per share came in at $2.12, well below the roughly $3.02 analysts had forecast, after an $8.66 billion loss on equity holdings reversed a huge $99 billion gain from the previous quarter.

The bright spot was Google Cloud, which more than doubled its revenue to $30.71 billion, a jump of 103% driven by demand for AI infrastructure and the company's custom TPU chips. Chief executive Sundar Pichai said the Gemini app has now passed one billion users, making it the fastest-growing product in Google's history, and that search query growth hit its highest rate in five years. YouTube advertising also grew, reaching $11.2 billion.

But the core advertising business disappointed. Search revenue of $63.35 billion and total advertising sales of $82.01 billion both missed forecasts, while operating income of $40.58 billion came in below expectations. With capital spending of around $51 billion in the quarter alone, investors are now asking whether Alphabet's giant AI bet will pay off fast enough, even as its cloud business booms.

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