Alphabet, Google’s parent company, has experienced a significant loss in market value, shedding approximately $500 billion after reporting underwhelming profits for the third quarter of 2026. This downturn is largely attributed to investor concerns over slowing advertising growth and increasing expenses in artificial intelligence (AI) development.
The company reported a net profit of $26.2 billion for the July to September period, marking a 25% decrease from the previous year. Earnings per share were reported at $2.12, which did not meet market expectations. Despite this, Alphabet’s revenue saw a 25% year-on-year increase, reaching $127.6 billion, though it still fell short of forecasts.
Advertising, a cornerstone of Alphabet’s income, showed slower growth rates. Advertising revenue rose by 11% to $82 billion, and Google Search revenue increased by 12% to $63.4 billion. YouTube’s advertising revenue grew by 9% to $11.2 billion, a decrease from the previous quarter’s pace.
Conversely, Google Cloud demonstrated robust performance with a 103% surge in revenue to $30.7 billion, fueled by rising demand for cloud computing services and AI infrastructure. The division’s operating income tripled to $11.1 billion, underscoring the growing significance of cloud services within Alphabet’s operations.
Alphabet is investing heavily in its AI chip business to cater to the demand from companies building advanced AI systems. The tech giant’s Tensor Processing Units (TPUs) are increasingly considered viable alternatives to Nvidia’s chips, potentially opening a new revenue stream.
However, these expansions come at a high cost. Alphabet’s capital expenditure more than doubled over the past year, reaching $51.4 billion in the third quarter. The majority of this spending is allocated to data centers, AI chips, and related infrastructure. The company anticipates its capital expenditure to lie between $195 billion and $205 billion for 2026, with further increases expected in 2027 as it bolsters its position in the competitive AI market against rivals like OpenAI and Anthropic.
Additionally, Alphabet’s investment portfolio recorded an $8.7 billion loss on equity investments, exacerbating the pressure on its quarterly profits. While strong cloud revenue and increased AI adoption present growth opportunities, the combination of slowing advertising momentum and rising infrastructure costs raises questions about the timeline for these investments to yield sustainable returns.