Alphabet reported strong top-line growth for the July-through-September quarter, but revenue and earnings fell short of Wall Street expectations, sending the Google parent company's shares lower in Wednesday's after-hours trading.
Revenue rose 25% year over year to $127.58 billion, Alphabet said. Analysts surveyed by FactSet had expected $127.97 billion. The gap was relatively narrow on sales, but the earnings comparison was more pronounced after an investment-related charge reduced the quarter's per-share result.
Net income was $26.17 billion, down from $34.98 billion in the same period a year earlier. Alphabet reported earnings of $2.12 per share, including an $8.7 billion loss on equity investments that reduced earnings by 55 cents per share. Analysts had been expecting about $3.01 per share.
“We’re now on a half-trillion dollar revenue run rate. Our deep full stack approach is driving momentum across the business,” Alphabet CEO Sundar Pichai said in a statement.
Cloud and artificial intelligence remain central to growth
Alphabet's cloud business was the strongest named growth area in the report. Google Cloud revenue increased 103% from a year earlier to $30.7 billion, a record rate of growth for the segment according to the company. Pichai said artificial intelligence infrastructure and solutions were major contributors to the cloud performance, reflecting customer demand for those services.
The quarter also highlighted the scale Alphabet is attributing to its consumer AI products. Pichai said the Gemini app, the company's artificial intelligence assistant, had reached 1 billion users. He described it as the fastest-growing product in Google's history, a claim made by the company rather than an independently verified industry ranking.
Alphabet Chief Financial Officer Anat Ashkenazi said during a call with investors Wednesday that the company still expects capital expenditures to increase significantly in 2027. She said more detail would be provided during the company's fourth-quarter call. The comment adds to the financial importance of the company's AI expansion, although Alphabet did not provide a more specific 2027 spending figure in the reported results.
Key figures from the quarter
- Revenue: $127.58 billion, up 25% year over year
- FactSet revenue expectation: $127.97 billion
- Net income: $26.17 billion, compared with $34.98 billion a year earlier
- Earnings per share: $2.12, versus analyst expectations of about $3.01
- Google Cloud revenue: $30.7 billion, up 103% from the prior year
The results put two different parts of Alphabet's business in focus. Cloud growth accelerated sharply and management pointed to demand for AI infrastructure and solutions. At the same time, the investment loss weighed on reported earnings, while total revenue did not reach the FactSet consensus estimate. Those factors combined to pressure the stock in the after-hours session rather than allowing the revenue growth headline to carry the market reaction.
