Results and the shortfall
Alphabet posted $111.2 billion in sales after subtracting partner payments for the quarter ending Sept. 30, missing the $111.3 billion that analysts expected. Net income was $2.12 per share, short of the $2.99 consensus. The company's stock slid by as much as 7.9% after hours.
What the company is spending on
The misses are a sign the company is not yet generating enough return to justify its massive AI investments. Google has pushed capital expenditures to new highs to build AI infrastructure for itself and for customers, which in turn has helped it become a leading provider of computing power to AI firms including Anthropic PBC and Meta Platforms Inc.
Customers, products, and the consumer push
Alphabet is also building its own AI models and weaving them into consumer products such as Search, YouTube, and Gmail. Those efforts, however, have yet to deliver results that line up with the scale of its spending.
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What it means for your portfolio
In plain English: Alphabet is spending big to be the compute backbone for AI and to bake AI into its own apps, but the financial payoff is trailing the outlay for now. Investors will be watching how quickly demand from customers like Anthropic and Meta converts into earnings, and whether consumer-facing AI features start to lift profits enough to cover those record capex bills.
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