Alphabet lost $482 billion of market value on Thursday, the second-largest single-day wipeout in U.S. history and the steepest drop since the company went public in 2004. Shares fell more than 13 percent after the Google parent reported third-quarter results that featured record revenue, surging cloud growth and a 25 percent decline in net income.
The number that mattered
Revenue rose 25 percent to $127.6 billion. Google Cloud revenue more than doubled to $30.7 billion from $15.2 billion a year earlier, driven by what the company called huge demand for AI infrastructure and solutions. Operating income climbed 30 percent to $40.6 billion, lifting the operating margin to 31.8 percent from 31 percent.
Net income fell to $26.2 billion from $35.1 billion in the year-ago quarter. Diluted earnings per share dropped 26 percent to $2.12, dragged down by the issuance of 36 million new shares and an $8.2 billion swing in other items that moved from a $12.8 billion gain to an $8.2 billion expense. The swing turned $40.6 billion of operating income into $32.4 billion of pre-tax income, versus $44 billion a year earlier.
The capex machine
Capital expenditures jumped to $51.4 billion from $24 billion in the prior-year quarter and $44.9 billion in the second quarter. Free cash flow turned negative for a second consecutive quarter, at $9.1 billion. The spending is funding the AI infrastructure that is also driving the cloud acceleration, leaving investors to weigh record top-line growth against a deepening cash burn.
Search deceleration
Google Search revenue grew 12 percent to $63.4 billion, down from 17 percent growth in the second quarter. The slowdown feeds the concern that AI agents are beginning to erode the core franchise even as they fuel the cloud business. For now, the math is simple: the upfront costs of building the models are running well ahead of the revenue they generate, and the market priced that gap at nearly half a trillion dollars in a single session.