Alphabet reported Q3 revenue of about $127.6 billion, up 25% year over year but below Wall Street estimates of about $128.2 billion. Adjusted EPS was $2.67, missing expectations of $3.02, and net income fell 25% to $26.17 billion. Search ad revenue grew 12% to about $63 billion but missed estimates. Free cash flow was negative $9.07 billion, worse than expected. Shares fell about 13% in early trading Thursday, potentially the worst post-earnings drop since Alphabet's 2004 IPO.
Aggressive AI infrastructure spending is accelerating cash burn. Alphabet kept 2026 capex guidance at $195 billion to $205 billion and said spending will increase significantly in 2027. Search usage is growing, but monetization is under pressure as people shift to AI tools, including Google's own AI Mode, and as rivals like OpenAI's ChatGPT and Anthropic's Claude take share.
Alphabet shares fell about 13% in early trading Thursday after Q3 revenue and profit missed estimates, and CNBC reported it was on track for its biggest post-earnings drop since its 2004 IPO. The $520 billion market-cap loss figure was not independently confirmed in the available reports but is roughly consistent with a 13% decline.
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SThis is Market Open, I'm Sloane. Alphabet is getting taken apart this morning.
EAnd I'm Eric. The Kobeissi Letter posted on X that Alphabet is on track for its biggest post-earnings drop on record.
SDown about thirteen percent in early trading. That wipes out roughly half a trillion dollars of market value.
EThe half a trillion dollar figure isn't confirmed, but with a move that size, it's in the ballpark. The damage is real.
SRevenue was one twenty-seven point six billion dollars, up twenty-five percent, and Wall Street wanted one twenty-eight point two. A narrow miss.
EAdjusted earnings per share came in at two dollars sixty-seven, versus three dollars and two cents expected. Net income fell twenty-five percent.
SThat's the headline miss. But this is really about AI spending.
ESearch usage is still growing, and they missed revenue by less than one percent. This is a cash burn story, not a broken business.
SFree cash flow was negative nine billion dollars. That's not a rounding error, Eric.
EOf course it is. They kept capex guidance at one ninety-five to two hundred and five billion dollars for this year.
SThe CFO says spending increases significantly in 2027. They're building the future.
EBut search ads, their crown jewel, grew twelve percent to sixty-three billion and still missed. People are shifting to AI tools, including Google's own AI mode.
SThey're scaling ads in AI Overviews and AI Mode. It's early.
EGoogle has the search distribution, the data, the users. I'd rather be early and ugly than late and beautiful.
S"Ugly" is doing a lot of work. Ben Barringer from Quilter Cheviot called the results "fairly messy," with a "poorly handled earnings call."
EHe says Google has "lost its edge with Gemini." He also said Google is behind on agentic AI.
SBut agents are the next turn, and Google has the ecosystem — Search, Android, Workspace. The burn is uncomfortable, but the alternative is worse.
EHere's my worry. Google pushes people into AI Mode to answer the query, but the query never becomes a click.
SThat's why they're putting ads into AI Mode. They know exactly what's at stake.
EIt's reportedly their worst post-earnings drop since the 2004 IPO. The market is saying the cash burn is not just uncomfortable, it is the problem.
SNo, the market is overreacting to an earnings miss. This is the same market that bid them up on the same AI story.
EHalf a trillion in market value for a revenue miss of under one percent is emotional, not analytical.
SThe revenue miss was small, but the profit miss was huge. Two sixty-seven versus three oh two is margin pressure from third-party cloud capacity.
EThe CFO, Anat Ashkenazi, flagged near-term margin pressure. That's straight from the call.
SIf they don't spend, they lose the AI race to OpenAI and Anthropic. If they do spend, cash flow gets crushed for a while.
EThey cannot flinch. Joey Nelson on X put it well: "Watch the capex line, not the stock."
S"If AI spend gets cut, data center contractors feel it in about two quarters."
EThat's exactly the risk. If Alphabet pulls back on spending, the whole AI supply chain feels it.
SOr shareholders force them to. If the stock keeps falling, the board will hear about it.
ESo now you're arguing they should keep spending. A minute ago the cash burn was the problem.
SI'm saying both paths are ugly. They're stuck between missing AI and burning cash.
EFine, but the company with the most to lose is the one that hesitates. I'll take the burn over the whimper.
SThe stock will decide. Right now it's saying the burn is more real than the upside.
EAnd the bond market is watching too. AI capex is now a macro story, not just an Alphabet problem.
EDifferent world entirely — Unusual Whales posted on X that DoorDash will acquire Instacart for about seventeen billion dollars, citing CNBC.
SI saw that. I can't find the actual CNBC piece yet.
EThat's a huge number for a grocery delivery company that has been fighting for its life.
SThe terms being floated are sixty-five dollars a share. Instacart holders can take cash, DoorDash stock, or a mix, with stock capped at twenty-five percent.
EChamath Palihapitiya is already out on X with a take. He posted, "The evolution of the Amazon Prime Subscription for the modern age is at hand..."
SOf course he did. But think about it: DoorDash already delivers from restaurants, convenience stores, pet stores.
EAdding Instacart's grocery network makes it a subscription for your whole day.
SA subscription for groceries and dinner — that's Amazon Prime without the cloud, the warehouses, the streaming, and the profits.
EDoorDash has the drivers, the logistics, the membership. Instacart has the grocery relationships and customer data.
SThe overlap is also why the price should be questioned. Seventeen billion for a company losing share to DoorDash and Uber?
EIt's defensive. If DoorDash doesn't buy Instacart, someone else might, or it keeps bleeding in grocery.
SBut this is a report, not a done deal. Until the companies release something, both stocks are going to lurch.
EStrategies that make sense and still destroy value are not rare. I'll wait for the ink.