Alphabet shares slump as profit falls and advertising growth slows
Alphabet’s shares fell more than 10% in after-hours trading after the Google owner reported a sharp drop in profit, slower advertising growth and revenue slightly below forecasts. The results raised concerns about whether its heavy investment in AI can deliver returns quickly, even as the company’s cloud business expanded rapidly.
Net profit fell 25% year on year to $26.2bn, while revenue rose 25% to $127.6bn. Advertising revenue increased 11% to $82bn; search growth slowed to 12%, and YouTube advertising growth eased to 9%. Google Cloud revenue more than doubled to $30.7bn, helped by sales of its AI chips, while quarterly capital spending reached $51.4bn and Alphabet forecast $195bn to $205bn for 2026.
In short
- Alphabet shares fell more than 10% after its profit missed expectations.
- Advertising growth slowed, while Google Cloud revenue more than doubled.
- AI investment drove quarterly capital spending to $51.4bn.
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The case for
Alphabet’s large AI investments could strengthen its cloud business, improve its products and help it compete in a fast-changing market; the rapid growth in cloud revenue offers some evidence of demand. Spending heavily now may be a reasonable long-term strategy even if returns take time to emerge, and slower advertising growth in one quarter does not by itself establish a lasting decline.
The case against
The profit drop, advertising slowdown and revenue miss raise reasonable doubts about whether Alphabet can sustain its growth in its core business while committing unprecedented sums to AI infrastructure. Investors may question whether those costs will generate returns soon enough, particularly if advertising remains sluggish or the AI and cloud gains fail to offset pressure elsewhere.
Explained simply
Alphabet is the parent company of Google, whose services include its search engine and YouTube. Advertising shown across those services is a major source of Alphabet’s income, while Google Cloud sells computing and data services to businesses.
The company is also spending heavily on artificial intelligence, including the computing equipment needed to develop and run AI systems. Google Cloud’s growth and sales of its AI chips are part of that effort, but the spending is large and investors are watching whether it can support future income.
Alphabet’s results matter because the company is one of the largest players in online advertising and technology. Changes in advertising demand, cloud services and AI investment can affect its finances and influence competition across the technology industry.
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Originally published by The Guardian as “Investors turn on Google owner Alphabet after profit miss, ad slowdown and high spending”.