Google owner Alphabet loses $500bn in market value after profit disappoints Wall Street

Shares in the Google parent Alphabet fell double digits Wednesday evening into Thursday trading, erasing hundreds of billions of dollars in stock market value from the $4tn tech giant.

The company had reported lower-than-expected profit and a slowdown in its advertising business while it maintained big spending on AI.

Net profit slid 25% from a year earlier to $26.2bn in the July-to-September period, or $2.12 a share, well short of expectations by analysts surveyed by FactSet.

Alphabet booked an $8.7bn loss on its equity investments, which it attributed to its stake in SpaceX, the Elon Musk-led company where shares have struggled since going public in June.

Revenue, however, rose 25% to an enormous $127.6bn. The figure was slightly below the roughly $128bn analysts had forecast.

Advertising revenue grew 11% to $82bn, short of expectations. Revenue from Google’s search business, still the company’s largest source of income, rose 12% to $63.4bn, slowing from 17% growth in the previous quarter.

YouTube, now the most-watched content provider on American TV screens, saw advertising revenue grow 9% to $11.2bn, down from 13% growth in the previous quarter. YouTube Music and Premium passed 150 million subscribers worldwide, including trials.

Google Cloud, which rents computing power and AI tools to businesses, saw revenue jump 103% to $30.7bn, ahead of analyst expectations.

The company said sales of its in-house AI chips, known as TPUs, contributed significantly to that growth. Operating income for the unit tripled to $11.1bn.

Google is also selling its TPU chips to outside companies, in a growing challenge to market leader Nvidia. OpenAI reportedly plans to buy some of the chips.

Alphabet’s “Other Bets” division, which includes the robotaxi company Waymo, posted revenue of $372m and an operating loss of $2bn.

Waymo now provides more than 500,000 paid rides a week across 15 US metropolitan areas and aims to reach 1m weekly rides by the end of the year.

Alphabet spent $51.4bn on capital expenditures during the quarter, mostly on datacenters and AI chips, more than double the $24bn a year earlier.

Its latest forecast for capex spending is between $195bn to $205bn in spending for 2026.

The company said it would continue to increase capex spending significantly in 2027.

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“I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise,” Sundar Pichai, the Google CEO, told analysts of the company’s investment splurge.

The company’s spending, which included a fine paid to the European Union, outstripped the cash generated by Alphabet’s businesses for a second straight quarter, leaving a $9.1bn gap.

During the quarter Alphabet raised $28.7bn by selling bonds and $12.4bn by issuing new shares to help pay for its AI ambitions.

Google has stepped up the pace of its AI releases since a delay to a flagship model in July raised questions about whether it was falling behind rivals OpenAI and Anthropic.

It launched Gemini 4 at the end of September and later released a version focused on cybersecurity.

The Gemini app has reached 1bn users. Google’s AI models now process nearly 32bn tokens, or units of text, per minute, more than four times the level of a year ago, the company said.

Anthropic, the maker of the Claude chatbot, is also one of Google’s largest cloud customers. It has committed to using up to one million Google AI chips.

In September, a US judge declined to order Google to sell off parts of its advertising technology business, imposing restrictions on how it operates instead.

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