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Alphabet, Google’s parent company, suffered a historic stock-market setback after its latest financial results raised concerns about advertising growth and the rising cost of AI. The company’s shares fell sharply on Thursday, October 29, wiping out more than USD 500 billion in market value as investors questioned whether its AI investments would deliver returns quickly enough.
The sell-off followed Alphabet’s third-quarter earnings report, released on October 28. Although revenue increased, the company fell short of Wall Street’s expectations for sales and profit. Investors were also concerned about heavy spending on AI infrastructure and weaker-than-expected advertising performance.
Google’s traditional search business remains a major source of income, but its AI-powered search features are changing how users find information online. These experiences can provide direct answers, potentially reducing the number of advertisements users see.
Alphabet reported that search advertising revenue rose 12% year over year to USD 63.35 billion. However, the growth was slower than in previous quarters and fell short of market expectations.
The results have raised questions about how Google can introduce AI features without weakening the advertising model that has supported its business for years. The company is experimenting with ways to generate advertising revenue from AI-powered search.
Alphabet’s capital expenditure reached USD 51.3 billion during the third quarter, driven largely by investments in data centres, computing equipment and AI infrastructure. The company reported negative free cash flow of approximately USD 9.1 billion, highlighting the financial pressure created by its expansion.
Revenue increased 25% to USD 127.6 billion, while net income declined 25% to USD 26.2 billion. The earnings shortfall added to concerns about the cost of competing in the AI market.
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Google Cloud revenue more than doubled to USD 30.7 billion, supported by demand for AI infrastructure and enterprise services. The growth shows that Alphabet is generating substantial business from AI, even as investors question its wider financial impact.
The challenge now is to turn those investments into sustainable returns without undermining Google’s core advertising business. Alphabet’s latest results have made that balance a central concern for investors.