Alphabet Shares Plunge 11% After Q3 Revenue Miss as AI Monetization Lags Search Growth

Alphabet (GOOGL) shares fell more than 11% in after-hours trading after the company reported third-quarter revenue and earnings that missed estimates, with management acknowledging that AI-driven search formats monetize at lower rates than traditional search. Search and related revenue rose 12% year over year to $63.35 billion but fell short of the $64.85 billion consensus, while total revenue of $82 billion came in below the $83.6 billion expected. Earnings per share of $2.12 badly missed the $2.99 estimate, partly due to an $8.66 billion net loss on equity investments tied to its SpaceX stake. Excluding traffic acquisition costs, revenue was $111.2 billion versus the $111.3 billion forecast. Google Cloud was the bright spot, with revenue up 103% to $30.7 billion and operating margin expanding to 36.2% from 23.7% a year earlier. YouTube ad revenue grew 9.2% to $11.2 billion, missing expectations. Capital expenditures climbed 114% to $51.4 billion, pushing free cash flow negative for a second straight quarter at -$9.1 billion. Alphabet said it expects full-year 2026 capital spending of $195 billion to $205 billion.