News from the IT community on October 29th: After Google's parent company, Alphabet, released its reports for the first three quarters of the fiscal year 2026 (January 2026 to December 2026) and the third quarter (July 2026 to September 2026) today, the stock price tumbled more than 7% after the market closed.
Although revenue in the third fiscal quarter reached $127.6 billion (Note from IT: Current exchange rate is approximately 852.501 billion RMB), a year-on-year increase of 25%, and Google Cloud's revenue doubled, earnings per share of $2.12 (current exchange rate is approximately 14.2 RMB) fell far short of the market's expectation of around $3.02 (current exchange rate is approximately 20.2 RMB). Advertising revenue also failed to meet expectations, raising concerns among investors that the substantial AI investments will struggle to be converted into profits in a timely manner.
An important reason for the pressure on profits is a loss of $8.7 billion (approximately 58.125 billion yuan at current exchange rates) from equity investments. This loss reduced net profit by about $6.7 billion (approximately 44.763 billion yuan at current exchange rates) after taxes, which is equivalent to a dilution of earnings per share by $0.55 (approximately 3.7 yuan at current exchange rates).
Google's advertising revenue amounted to $82.01 billion (about 547.912 billion yuan at current exchange rates), which is lower than the market expectation of around $83.5 billion (about 557.867 billion yuan at current exchange rates). Total service revenue was $96.3 billion (about 643.384 billion yuan at current exchange rates), also falling short of analysts' forecast of $98.5 billion (about 658.083 billion yuan at current exchange rates), and this became one of the direct factors contributing to the decline in the stock price.
This quarter, Alphabet's capital expenditure reached $51.4 billion (approximately 343.406 billion yuan at current exchange rates), a significant increase from $24 billion (about 160.345 billion yuan at current exchange rates) in the same period last year; since the beginning of the year, cumulative capital expenditure has amounted to $132 billion (approximately 881.898 billion yuan at current exchange rates). The substantial investment in data centers, servers, and network infrastructure resulted in a negative free cash flow of $9.1 billion (about 60.797 billion yuan at current exchange rates) for that quarter.
The market had previously expressed concerns that Alphabet would significantly increase expenditures to support the expansion of AI and its cloud business, which could continue to suppress its cash return capability. The company had previously raised its full-year 2026 capital expenditure guidance to $195 billion to $205 billion (approximately 1.3 trillion to 1.37 trillion yuan at current exchange rates).
