Google's parent Alphabet missed Wall Street estimates on both revenue and profit for the September quarter, its first such miss in nearly four years, as heavy spending on artificial intelligence pushed free cash flow negative and sent the shares down more than 10 per cent in after-hours trading.
Revenue rose 25 per cent from a year earlier to $127.58 billion, short of the roughly $128.2 billion analysts had expected. Adjusted earnings per share came in at $2.67 against an estimate of $3.02. Net income fell to $26.17 billion from $34.98 billion a year earlier, dragged down by an $8.6 billion paper loss on equity stakes that the company attributed to its investment in SpaceX.
Capital spending on AI infrastructure reached $51.4 billion in the quarter, and free cash flow was negative $9.07 billion, far worse than the $2.70 billion analysts had expected. It is the first time the company has reported negative free cash flow in more than two decades as a listed company.
Google Cloud was the bright spot, with revenue up 103 per cent to $30.71 billion, ahead of estimates. Search and other advertising revenue grew 12 per cent to $63.35 billion, below expectations, and YouTube advertising rose 9 per cent to $11.2 billion.
Chief executive Sundar Pichai said the quarter was strong and pointed to a "half-trillion dollar revenue run rate", adding that the company's AI investments had driven the highest query growth in five years. Chief business officer Philipp Schindler attributed a sharper-than-expected slowdown in search advertising to greater use of AI Mode, and said advertising in that interface would be rolled out to international markets.
(With inputs from PTI and media reports)