Alphabet shares fall over 7% after profit miss

Alphabet shares fell more than seven percent in after-hours trading Wednesday after the Google parent reported profit below forecasts by analysts surveyed by FactSet and slower growth in its advertising business.

Net profit fell 25 percent from a year earlier to $26.2 billion in the July-to-September period, or $2.12 per share. Alphabet also booked an $8.7 billion loss on equity investments, which include a large stake in SpaceX.

Revenue rose 25 percent to $127.6 billion, slightly below the roughly $128 billion forecast by analysts surveyed by FactSet.

Advertising revenue grew 11 percent to $82.0 billion. Revenue from Google's search business rose 12 percent to $63.4 billion, slowing from 17 percent growth in the previous quarter. YouTube advertising revenue grew nine percent to $11.2 billion, down from 13 percent growth in the previous quarter.

Google Cloud revenue jumped 103 percent to $30.7 billion, ahead of analyst expectations, and operating income for the unit tripled to $11.1 billion. Alphabet said sales of its in-house AI chips, known as TPUs, contributed significantly to that growth.

Alphabet spent $51.4 billion on capital expenditures during the quarter, mostly on data centers and AI chips, more than double the $24 billion spent a year earlier. It forecast 2026 capital expenditure spending of $195 billion to $205 billion.

Free cash flow was negative for a second straight quarter at minus $9.1 billion. During the quarter, Alphabet raised $28.7 billion by selling bonds and $12.4 billion by issuing new shares to help pay for its AI plans.