Google Stock Craters 12% on Disappointing Earnings, Wiping Out $500 Billion in Shareholder Value

Google shares fell 12 percent in morning trading after the company reported its first combined revenue and profit miss in nearly four years, driven in part by a sharp swing into negative free cash flow. The drop, which is the largest in Google’s history, wipes out about $500 billion in shareholder value.

CNBC reports that shares of Alphabet, Google’s parent company, dropped about 12 percent as investors absorbed third-quarter results that fell short of Wall Street’s expectations on nearly every major line. Adjusted earnings came in at $2.67 per share, against analyst forecasts of $3.02. Revenue reached $127.58 billion, below the $128.22 billion analysts had projected, even though it marked 25 percent growth from the same period a year earlier.

Net income fell to $26.17 billion, or $2.12 per share, down from $34.98 billion, or $2.87 per share, a year ago. Operating income totaled $40.58 billion, missing FactSet’s forecast of $43.19 billion.

The most jarring number was free cash flow, which turned negative at $9.07 billion. Analysts had expected positive free cash flow of $2.70 billion. Capital expenditures, the amount the company spends on massive projects like data centers, came in at $51.36 billion, actually below the $55.09 billion analysts had expected, but Google held firm on its full-year capex guidance of $195 billion to $205 billion, a range it had already raised from $190 billion back in the second quarter. The company expects annual capex to top $200 billion going forward, and to exceed $300 billion in 2027.

Alphabet finance chief Anat Ashkenazi told analysts on the earnings call, “We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call.” That spending has come with a steep rise in long-term debt, which climbed to $125.1 billion from $21.6 billion a year earlier, an increase of roughly 479 percent.

Some of the quarter’s weakness traced back to Alphabet’s equity holdings. In the second quarter, the company had booked a $99.03 billion windfall tied to its stakes in SpaceX and Anthropic. That reversed in the third quarter, when the same equity holdings category produced an $8.66 billion loss.

Not every part of the business struggled. Cloud revenue more than doubled to $30.7 billion, beating the $28.7 billion analysts had expected, with the segment growing 103 percent compared with a Street estimate of 100 percent. Google continues to pick up market share from Amazon Web Services and Microsoft Azure. Thomas Kurian, making his first public earnings call remarks as Google Cloud CEO, said, “We are seeing extraordinary demand and strong growth from both AI labs, capital markets, financial service institutions, and enterprises.”

Jefferies analyst Brent Thill, speaking on CNBC’s Closing Bell: Overtime, was less impressed. “The cloud business was the only business that beat at 103 percent growth. The Street wanted 100 percent, so it didn’t beat by much, and it missed some of the high-end targets. Everything else missed,” he said.

On the artificial intelligence front, Alphabet pointed to the Gemini app, saying it has reached 1 billion users and calling it the fastest-growing product in the company’s history. Alphabet CEO Sundar Pichai also told analysts about a newly announced Carbon Gemini model, unveiled Wednesday, which follows the previously launched Argon Gemini model. Pichai said the new model performs well “on almost every domain.”