Alphabet shares fell more than 10% in after-hours trading Wednesday, erasing tens of billions of dollars in stock market value from the $4tn tech giant after net profit slid 25% from a year earlier to $26.2bn. Net profit missed forecasts even though total revenue rose to $127.6bn. Revenue from Google's search business, which remains the company's largest source of income, increased 12% to $63.4bn, slowing from 17% growth in the previous quarter.
Alphabet spent $51.4bn on capital expenditures during the quarter, mostly on datacenters and AI chips, more than double the $24bn spent a year earlier. This spending, which included a fine paid to the European Union, outstripped the cash generated by Alphabet's businesses for a second straight quarter, leaving a $9.1bn gap.
Google is also selling its TPU chips to outside companies in a growing challenge to market leader Nvidia. In September, a US judge declined to order Google to sell off parts of its advertising technology business, choosing instead to impose restrictions on how it operates.
The financial results fell well short of expectations as the company reported a slowdown in its advertising business while maintaining heavy investments in artificial intelligence.
Despite the broader financial pressures, Google Cloud saw revenue jump 103% to $30.7bn, coming in ahead of expectations as the unit rents computing power and AI tools to businesses. Anthropic, the maker of the Claude chatbot, stands as one of Google's largest cloud customers.