Google stock after earnings: Why Alphabet sank about 10% late Wednesday and what Wall Street is watching next

Alphabet heads into Thursday’s trading session under pressure. Shares of the Google parent fell sharply in extended trading Wednesday after its third-quarter report, with drops of about 9% to 11% reported by different outlets. AP reported the stock was down about 9% at $295.20 within an hour of the close, while CNBC said it was off close to 10% and Adweek put the after-hours drop at roughly 11%.

The headline numbers came out Wednesday evening: revenue up 25% to $127.6 billion, slightly below estimates, and earnings of $2.12 a share. Overnight, the focus shifted from the miss itself to a bigger question for investors: whether AI is starting to cut into Google’s most profitable business.

Why is Google stock down?

Two reasons dominated the coverage.

1. AI Mode is growing faster than it makes money. Google Search revenue growth slowed to 12% from 17% in the second quarter, Adweek reported. Chief Business Officer Philipp Schindler said on the earnings call that “the strong growth in AI Mode queries had an impact because of the lower monetization we are seeing in AI Mode,” according to CNBC. He also cited foreign-exchange effects and one-off pullbacks by some Asia-Pacific advertisers. Total ad revenue of about $82 billion missed expectations of roughly $83.4 billion to $83.5 billion.

2. The AI buildout is consuming cash. Alphabet reported negative free cash flow of about $9 billion, its second straight quarter of cash burn, investingLive reported, citing LSEG data that showed analysts expected close to breakeven. Capital spending was $51.4 billion in the quarter. CFO Anat Ashkenazi kept the 2026 range of $195 billion to $205 billion and said spending would “increase significantly” in 2027, without giving a figure.

Why did Alphabet’s earnings per share fall?

Earnings of $2.12 a share were down about 26% from a year earlier. Adweek reported the company tied that to an unrealized loss on its SpaceX stake, and AP said results included an $8.7 billion loss on equity investments. AP noted it was not immediately clear whether the reported figure was comparable to analysts’ estimate of about $3.01. Other reports compared adjusted earnings of $2.67 with expectations of $3.02.

What are analysts saying?

The tone was cautious.

• Gil Luria of D.A. Davidson told CNBC that “investors should be more cautious” given the “abrupt deceleration” in digital advertising, adding that “the burden of proof is now on Google” to show it is not in permanent decline as people shift to AI chat.
• JPMorgan’s Doug Anmuth asked on the call whether the “disconnect” came from Google showing fewer ads in AI Overviews and AI Mode as those make up a bigger share of queries.
• Bob O’Donnell of TECHnalysis Research told CNBC that “we’re starting to see changes in habits.”

What is Google doing about it?

Schindler said ad tests in AI Mode have shown “promising results” and that Google is scaling ads in AI Mode and AI Overviews to more users and queries, including its first international rollout of AI Mode ads and new multi-turn ads in the U.S., according to Adweek. “To be clear, we feel very good about our trajectory here,” he said.

What went right?

Google Cloud revenue more than doubled, up 103% to $30.7 billion. Ashkenazi said the cloud backlog has grown to about $560 billion, investingLive reported, with more than 55% expected to be recognized within 24 months. YouTube ads rose 9% to $11.2 billion, per Adweek. CEO Sundar Pichai said the Gemini app has reached one billion users, AP reported.

What should investors watch Thursday?

• The regular-session open: After-hours moves don’t always hold once full trading begins.
• Read-through to big tech: investingLive noted the contrast with Microsoft, whose shares rose more than 5% after its own report on stronger cash flow, and said attention turns next to Amazon’s results.
• The 2027 capex number: Investors are waiting for a figure behind “increase significantly.”
• AI Mode ads: Whether the new ad formats steady the core ad business in coming quarters.

This article is for information only and is not investment advice.

FAQ

Earlier coverage: Alphabet stock falls after Q3 earnings miss as AI spending drives cash burn (Oct 28)