Alphabet tanks to April levels on quarterly miss

Alphabet misses Wall Street consensus on top and bottom lines in Q3.
Q3 revenue rises 25% YoY, led by a 103% increase in its cloud segment.
Search revenue rises 12%, YouTube ads gain 9% YoY.

Clay Webster FXStreet

Alphabet (GOOGL) stock slumped about 9% lower afterhours on Wednesday after the search giant posted a sizable miss for the third quarter. CEO Sundar Pichai's company missed Wall Street's consensus GAAP earnings per share (EPS) figure by $0.89 or nearly 30%.

In response, GOOGL stock sank from a close in the regular session near $325 to $290, a price tag the market hasn't seen since April's Iran war sell-off.

Alphabet posted EPS of $2.12 in Q3, well off the $2.87 figure from one year ago or the $9.11 posted a quarter ago. The Q2 figure from July was artificially inflated by enormous gains from its stakes in SpaceX (SPCX) and the privately-held Anthropic.

Revenue in Q3 climbed 25% YoY to $127.6 billion but still missed the Wall Street consensus by $330 million. Google Services revenues increased 11% YoY to $96.3 billion, led by a 12% increase in Search. Google Cloud delivered record growth as revenues increased 103% to $30.7 billion.

"Our AI investments are driving overall Search query growth, including commercial queries," said Pichai in a statement. "In fact, our [YoY] query growth rate is the highest it’s been in the last five years."

Pichai said that the cloud business was "powered by huge demand for our AI infrastructure and AI solutions" but also saw meaningful growth in sales of TPU systems.

"[O]ur first-party model APIs are now processing nearly 32 billion tokens per minute, more than four times what we processed a year ago," Pichai said, referencing the company's Gemini 4 Argon and Carbon AI models.

Consolidated Alphabet operating income rose 30% annually, and the Mountain View-based company reported an operating margin of 31.8%, up about 1% from a year earlier.

YouTube ad revenue climbed 9% YoY to $11.2 billion.

Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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