Tech & AI
Alphabet shares fall as Google Cloud revenue doubles to $30.7 billion but AI spending and negative free cash flow worry investors
Third-quarter revenue rose 25% to $127.6 billion, yet the stock dropped on heavy capital spending and a signal of more to come in 2027.
HedgeWeekly Tech & AI Desk ·
Alphabet reported third-quarter revenue of $127.6 billion on October 28, up 25% from a year earlier, as Google Cloud revenue rose 103% to $30.7 billion, according to the company's filing as summarised by AI Weekly and Yahoo Finance.
Capital expenditure, the money spent on data centres and chips, was about $51 billion in the quarter. Yahoo Finance reported free cash flow of negative $9.1 billion, the second negative quarter in a row, and said Alphabet raised $28.7 billion of debt and $12.4 billion through at-the-market share sales. It also reported earnings per share of $2.12, below analyst forecasts, hurt by an $8.7 billion loss on equity investments including a SpaceX stake. Those items come from a single outlet and were not independently confirmed.
Shares fell 11% in Thursday morning trading to about $288, Yahoo Finance reported, while Microsoft rose about 2% after posting Azure growth of 48%. Alphabet has signalled a significant increase in capital spending in 2027.
Why it matters: the reaction shows investors are rewarding AI spending only when cash generation keeps pace. Watch Alphabet's formal 2027 capex guidance, whether cloud growth stays above 100%, and how heavily the company leans on debt and equity markets to fund the build-out, a theme also hanging over Amazon and Meta.