Alphabet shares slide 13% as ad revenue misses forecasts and spending mounts

Alphabet shares fell about 13% in early New York trading on Thursday, 29 October, after the Google parent’s advertising revenue missed analysts’ forecasts and heavy spending pushed free cash flow further into negative territory. The fall weighed on the Nasdaq. Dutch news agency ANP estimated that roughly $489bn had been wiped from Alphabet’s market value during the slide; that was an early trading estimate, not a closing loss.

Alphabet reported $82.01bn in advertising revenue for the July-to-September quarter, below the $83.4bn analysts had expected, according to Reuters. But search and related revenue rose to $63.35bn from $56.57bn a year earlier, while Google Cloud revenue more than doubled to $30.71bn. Total revenue increased 25% to $127.58bn. The disappointment was against forecasts, not a fall in search revenue.

The sharper concern is the cost of expansion. Alphabet generated $42.29bn in cash from operations during the quarter but spent $51.36bn on property and equipment. That left free cash flow — operating cash flow minus that expenditure — at negative $9.07bn, compared with negative $5.86bn in the previous quarter. It remained positive at $19.75bn over the latest 12 months. Finance chief Anat Ashkenazi told analysts that capital expenditure was expected to rise significantly in 2027 from a forecast $195bn–$205bn this year, Reuters reported.

ANP suggested that the negative cash-flow figure increased the risk of difficulty paying bills. Yet Alphabet reported $265.10bn in cash and marketable securities at 30 September, against $134.50bn in short-term liabilities. A quarter in which investment exceeds cash generated by operations does not, on its own, indicate a payment problem. The balance sheet is a snapshot, however, and does not establish how the company will fund all its future spending plans.