Alphabet shares plunge 12.6% as quarterly AI capex surges to $51.4 billion Google

Alphabet shares tumbled 12.6% in a single session following its third-quarter earnings report, wiping out nearly $500 billion in market capitalization amid investor anxiety over escalating AI infrastructure expenses.

While quarterly revenue grew 25% year-over-year to $127.6 billion, massive spending on data centers and custom AI silicon pushed quarterly capital expenditures to $51.4 billion and turned free cash flow negative.

What it is

• Record capital expenditures. Capital outlays reached $51.4 billion in Q3 alone, more than doubling from the prior year and bringing full-year 2026 capex guidance to $195–205 billion.
• Negative free cash flow. Due to heavy data center and TPU expansion, Alphabet recorded negative free cash flow of -$9.1 billion for the quarter.
• Cloud acceleration versus search deceleration. Google Cloud revenue doubled to $30.7 billion, but core Search ad revenue growth cooled to 12%, with executives acknowledging lower monetization on queries served through AI Mode.
• Further capex expansion planned. Management signaled that infrastructure investments will grow significantly into 2027 to meet frontier model training and enterprise agent demands.
• Infrastructure roadblocks. In Finland, local authorities halted site preparations for two planned Google data centers pending environmental impact assessments.

Financial overview

Sources

• Alphabet Investor Relations Earnings Release
• Alphabet SEC Form 10-Q