ECONOMY & MARKETS
Alphabet shares slide as AI spending and quarterly results disappoint investors
A 12 per cent fall in the shares followed third-quarter revenue and profit that missed Wall Street forecasts, reviving doubts over whether record AI infrastructure spending will pay off.
Alphabet's shares fell more than 12 per cent at the Thursday open, their lowest level since March, after the Google parent missed Wall Street expectations on both revenue and profit for the third quarter. The sell-off places the financing of the company's artificial-intelligence build-out at the centre of its results: the question investors are now pressing is whether the record sums directed at AI infrastructure will ultimately be recovered, and that doubt attaches directly to Alphabet's earnings.
Revenue rose 25 per cent to $127.6bn, a 13th consecutive quarter of double-digit growth but half a percentage point below forecasts. Advertising around Google Search, the group's principal source of money, grew 12 per cent to $63.4bn against analyst estimates of about $65bn; YouTube advertising brought in $11.2bn, narrowly short of expectations. Profit fell by a quarter to $26.2bn, or $2.12 a share, down from $2.87 a year earlier and below the nearly $3 the market had expected.
The capital-spending side drew separate scrutiny. Handelsblatt's AI briefing reported that Alphabet lost roughly 10 per cent of its market capitalisation after hours, citing $51.4bn in spending on data centres and other fixed assets. The same account contrasted Alphabet's treatment with that of Microsoft, which was rewarded by investors for putting less money into data centres while Alphabet was penalised for spending heavily.
The industry benchmark came from Anthropic, whose stock-exchange prospectus was published on Monday, ahead of Wednesday's results from Microsoft and Alphabet. The San Francisco start-up behind the Claude models reported falling operating costs for AI: data-centre capacity accounted for 48 per cent of revenue in its second quarter, against 72 per cent in the preceding quarter and 251 per cent in the first quarter of the previous year. That trajectory is the strongest current evidence cited for the possibility that the multibillion-dollar wager on AI may yet succeed, and it frames how Alphabet's outlay is being judged. Whether the investments justify themselves remains unresolved; the sources give no further milestone at which that judgment would be settled.