Google stock sinks over 10% after Alphabet misses Q3 revenue and profit estimates
Weak ad sales and a negative cash flow rattled investors, though one CFRA analyst says the dip could reward patient buyers.
Alphabet shares fell more than 10% in after-hours trading on Wednesday after Google's parent missed Wall Street's third-quarter targets for both revenue and earnings. Advertising, the company's biggest money engine, was the main source of the shortfall.
Alphabet reported revenue of $127.6 billion, short of the $128.2 billion analysts expected. Advertising brought in $82.01 billion, about $1.41 billion below forecasts. Adjusted earnings per share came in at $2.67 against an expected $3.02, according to a Reuters report cited in the source coverage.
Profit also took a hit. Net income available to common shareholders dropped 25% to $26.17 billion. Free cash flow turned negative at $9.07 billion, when analysts had expected something near break-even. Heavy spending on cloud capacity and AI research drove the cash outflow.
For everyday investors, the message is simple: Google is spending big on AI, and the payoff is not yet showing up in the numbers. The stock had already struggled since July's earnings, and this report added fresh pressure. Rival Microsoft, by contrast, beat expectations on both revenue and earnings.
Still, CFRA Research analyst Angelo Zino told Yahoo Finance the pullback was not a shock, given worries about margins and tough advertising comparisons. He argued the long-term story remains intact and sees the drop as a possible entry point for investors with a 12-month view.
What to watch next? Zino said analysts want management's guidance on advertising, since tougher comparisons are expected to last into the fourth quarter and the first quarter of next year. Google Cloud is the other focus, especially how much of its growth comes from Gemini, Alphabet's AI offering. He also flagged hardware as a margin risk because it earns less.
Read the original report on The Economic Times.
