Alphabet Shares Fall 10% as $9 Billion Cash Loss Hits Investors

Shares of Alphabet dropped more than 10% in extended trading on Wednesday after the company reported a $9.07 billion loss in free cash flow for the third quarter. Investors had expected the tech giant to come close to breaking even, making the actual figure a sharp departure from market forecasts. The decline puts immediate financial pressure on a company that has long been a pillar of the tech sector.

The cash burn stems primarily from accelerated spending on artificial intelligence and cloud capacity. Chief Financial Officer Anat Ashkenazi stated that capital expenditures driven by AI will rise significantly in 2027. She noted that the forecast for the current year remains unchanged but warned of near-term margin pressure due to the use of third-party cloud capacity. This spending strategy reflects a broader industry trend where companies are balancing the cost of building AI infrastructure against the risk of falling behind competitors.

Alphabet’s total revenue for the quarter reached $127.6 billion, missing analyst estimates of $128.2 billion. The shortfall was driven by the core advertising business, which generated $82.01 billion in revenue, approximately $1.41 billion less than expected. While Google Cloud revenue more than doubled to $30.71 billion, exceeding forecasts, it was not enough to offset the weakness in advertising. Net income available to common shareholders fell 25% to $26.17 billion, and adjusted earnings per share of $2.67 missed the Wall Street target of $3.02.

The company also reported a $7.66 billion operating income loss in Alphabet-level activities, a category that primarily covers AI research and development expenses. This follows a $5.9 billion cash burn in the previous quarter, which marked the first time the company went negative in its 22-year history as a public entity. The current quarter continues that trend of heavy investment outpacing immediate returns.

In an effort to demonstrate its position in the AI race, CEO Sundar Pichai announced the new Gemini 4 Carbon model earlier on Wednesday. He told analysts on the earnings call that the new model means Google is again leading at the frontier. Thomas Kurian, the cloud chief, made his debut on an earnings call, signaling the growing influence of the enterprise-oriented business unit. Kurian said sales of Google’s tensor processing units had become a meaningful contributor to his division.

Alphabet competes with Amazon Web Services and Microsoft’s Azure as the third-largest cloud services provider globally. The company continues to expand enterprise commitments through multi-year deals in cybersecurity, retail, and financial services. Industry projections suggest that Alphabet, Microsoft, Amazon, and Meta will collectively spend well over $700 billion in 2026 to expand AI data center footprints and high-performance networking capacity. Supply bottlenecks for advanced silicon and power persist, but Alphabet’s use of custom chips alongside third-party GPUs has helped expand its service delivery capabilities.