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Alphabet shares fell as much as 13 percent in trading on October 29 2026 marking the largest single-day drop in the company’s market value on record and the second-biggest in Wall Street history according to a Financial Times assessment. The decline followed the release of third-quarter earnings the previous evening in which the company missed revenue and earnings estimates while revealing that its AI Mode search tool was generating less advertising income than traditional results a Reuters report stated. Philipp Schindler Google’s chief business officer attributed the deceleration in search ad growth to the expansion of AI Mode queries which produce fewer ads and lower monetisation per search than standard web results according to a transcript of the earnings call.
Alphabet reported total revenue of $127.6 billion for the three months ended in September up 25 percent from a year earlier but below the $128.2 billion consensus forecast compiled by LSEG and cited by Reuters. Google search and other properties revenue climbed 12 percent to $63.4 billion missing analyst projections of $64.9 billion and slowing from 17 percent growth in the prior quarter Bloomberg data showed. Overall advertising sales reached $82 billion also below expectations while net income fell to $26.2 billion or $2.12 per share compared with forecasts near $3 per share partly because of an $8.2 billion loss on a SpaceX investment the company disclosed.
Free cash flow turned deeply negative at $9.1 billion in the quarter exceeding analyst expectations for a near break-even result and marking only the second such quarter since Alphabet went public in 2004 a Reuters analysis found. Capital expenditures jumped to $51.4 billion more than double the year-earlier level as the company continued to build data centres and other artificial intelligence infrastructure according to its earnings release. Alphabet maintained its full-year capital spending forecast at between $195 billion and $205 billion while signalling plans to exceed $300 billion in AI-related investment during 2027 the release indicated.
Google Cloud revenue more than doubled in the period beating estimates and providing a bright spot in otherwise disappointing results according to multiple analyst notes compiled by The Next Web. The performance reflected strong corporate demand for artificial intelligence tools even as investors focused on the pressure AI features are placing on the core search franchise that still accounts for roughly half of total revenue a Bloomberg newsletter observed. Microsoft which reported results the same evening saw its shares decline only modestly after trimming its own artificial intelligence spending outlook to $170 billion TipRanks data showed.
Schindler told analysts on the earnings call that the company feels very good about its trajectory with AI search despite the lower monetisation. He highlighted promising early results from ad experiments and said Alphabet is scaling advertisements within both AI Overviews and AI Mode to more users while expanding the feature to additional countries including Brazil Mexico and the United Kingdom in the fourth quarter. The executive noted that many AI Mode queries represent upper-funnel commercial intent and are incremental creating further monetisation opportunities over time.
Tracy Woo a principal analyst at Forrester said the softer search performance highlights the challenge of funding massive AI investments while maintaining the strength of established businesses according to a Times report. The market reaction underscored investor concern that years of heavy spending on artificial intelligence may not quickly translate into proportional returns at the company’s dominant search business a Wall Street Journal summary stated. By the close of trading on October 29 Alphabet’s market capitalisation had fallen to approximately $3.46 trillion from $3.97 trillion the prior session Financial Times figures showed.
