Alphabet Shares Plunge 13% After Rare Earnings Miss
Alphabet shares fell a record 13% after a rare earnings miss, as surging AI infrastructure spending and weaker search ads overshadowed strong cloud growth.
Alphabet shares fell a record 13% on Thursday, October 29, 2026, after the Google parent reported its first earnings miss against Wall Street expectations since the last quarter of 2022. The selloff wiped hundreds of billions of dollars from the company's market value and dragged the Nasdaq 100 down about 1.5%, reviving doubts about whether the huge spending on artificial intelligence will pay off fast enough. The reaction was striking because parts of the business are still growing fast. Google Cloud revenue more than doubled from a year earlier, and search queries grew at their fastest pace in five years. But investors focused on the costs behind that growth - and on a weaker result in the advertising business that still pays most of Alphabet's bills.
What triggered the selloff
Alphabet reported earnings of $2.12 per share, well below expectations of about $3.02. Total revenue rose 25% from a year earlier to $127.6 billion, but that also came in below forecasts. Two one-off items hurt the bottom line. Alphabet booked an $8.2 billion unrealized loss on the value of its stake in SpaceX, and it paid $5.2 billion for a European Union antitrust fine. Together, they turned what would have been a softer quarter into a clear miss. Search advertising, Alphabet's largest business, grew at its slowest annual pace in five quarters. Revenue rose 12% to $63.4 billion, against expectations of $64.9 billion. Google's chief business officer told analysts that searches using AI Mode, the company's conversational search feature, bring in less advertising revenue than traditional searches.
Strong cloud growth, heavy AI bills
Google Cloud was the bright spot. Revenue climbed 103% from a year earlier to $30.7 billion, and the backlog of customer orders swelled to $561 billion. Customers are lining up for AI computing power, Google's own TPU chips, and Gemini enterprise seats. But building that capacity is expensive. Alphabet spent $51.4 billion on capital expenditure in the quarter alone, up from $44.9 billion in the previous three months. That pushed free cash flow to a negative $9.1 billion for the quarter, the second quarter in a row in negative territory. Management held firm on its full-year spending plan of $195 billion to $205 billion, which implies about $73 billion of spending in the final quarter. The company has also disclosed future commitments of more than $1 trillion covering data center leases, equipment, power, and computing capacity.
Why investors are worried
The selloff is less about one bad quarter and more about a question hanging over the whole AI boom: how long will it take for massive data center spending to turn into matching profits? Alphabet's case shows both sides of that argument. Demand for AI computing is clearly real, as the $561 billion cloud backlog shows. But depreciation on all the new data centers and chips is now rising, and AI search answers are earning less advertising money per query than the old search results they replace. Other tech shares felt the pressure too. Samsung fell after its own earnings disappointed investors, while Microsoft rose after solid cloud sales. The split shows investors are now judging each company on its own spending and returns, rather than buying the whole AI trade together.
What happens next
Investors will now watch three things. First, whether Alphabet's cloud growth stays strong enough to justify the spending plan. Second, whether search advertising recovers as AI Mode matures, or keeps earning less per search. Third, whether the next big tech results, including Amazon and Apple, calm or deepen the worry about AI costs. For now, the message from the market is plain. Even the strongest AI demand story is not enough on its own. Investors want proof that the money going into data centers comes back as profit, and on Thursday, Alphabet did not give them enough of it.
Sources
- Bloomberg - https://www.swissinfo.ch/eng/tech-rally-stalls-as-alphabet,-samsung-disappoint:-markets-wrap/92292231 - The Motley Fool - https://www.fool.com/investing/2026/10/29/alphabet-crushed-cloud-expectations-but-the-ai-bills-are-coming-due/ - PYMNTS - https://www.pymnts.com/news/artificial-intelligence/2026/googles-ai-exposure-exceeds-the-1-trillion-it-reported/