IT Home reported on October 29 that after Alphabet, Google's parent company, released its first three quarters of fiscal year 2026 (January to September 2026) and its third quarter report (July to September 2026), its stock fell more than 7% in after-hours trading.
Although third-quarter revenue reached $127.6 billion (approximately RMB 852.5 billion at current exchange rates), a 25% year-over-year increase, and Google Cloud revenue doubled, earnings per share of $2.12 (approximately RMB 14.2 at current exchange rates) fell significantly short of the market expectation of around $3.02 (approximately RMB 20.2 at current exchange rates), and advertising revenue also missed targets, raising investor concerns that massive AI investments may not be translating into proportional profits.
A key reason for the pressure on profits is an $8.7 billion (approximately RMB 58.125 billion at current exchange rates) loss from equity investments, which reduced net profit by approximately $6.7 billion (approximately RMB 44.763 billion at current exchange rates) after tax, equivalent to a reduction of $0.55 (approximately RMB 3.7) in diluted earnings per share.
Google's advertising revenue was $82.01 billion (approximately RMB 547.91 billion at current exchange rates), below the market expectation of approximately $83.5 billion (approximately RMB 557.87 billion at current exchange rates). Overall services revenue was $96.3 billion (approximately RMB 643.38 billion at current exchange rates), also below analysts' expectations of $98.5 billion (approximately RMB 658.08 billion at current exchange rates), serving as a direct catalyst for the stock's decline.
This quarter, Alphabet’s capital expenditures reached $51.4 billion (approximately RMB 343.41 billion at current exchange rates), a significant increase from $24 billion (approximately RMB 160.35 billion at current exchange rates) in the same period last year; year-to-date capital expenditures totaled $132 billion (approximately RMB 881.90 billion at current exchange rates). Heavy investments in data centers, servers, and network infrastructure led to negative free cash flow of $9.1 billion (approximately RMB 60.80 billion at current exchange rates) for the quarter.
Markets had previously worried that Alphabet’s significant increase in spending to support the expansion of its AI and cloud businesses could continue to suppress cash return capabilities. The company previously raised its full-year 2026 capital expenditure guidance to $195 billion to $205 billion (approximately RMB 1.3 trillion to 1.37 trillion at current exchange rates).