Alphabet shares suffered their worst day in history on Thursday, October 29, 2026, plunging more than 12% and erasing roughly $500 billion in market value after the Google parent company reported third-quarter profits that missed Wall Street expectations alongside surging capital expenditure on artificial intelligence infrastructure.
The tech giant posted adjusted earnings of $2.67 per share on revenue of $127.58 billion for the third quarter, according to figures published in a financial report. Both figures fell short of consensus estimates compiled by LSEG. Net profit slid 25% from a year earlier.
The resulting stock selloff erased approximately half a trillion dollars in market value according to the Wall Street Journal, triggering the second-largest single-day wipeout in corporate history behind Nvidia’s slide in early 2025. Alphabet Class A shares fell 12.6% to close at $283.82, resting not far above the 52-week closing low reached earlier in the year.
$GOOGL -12.8%, worst day since its 2004 IPO, a 30% drawdown @stockcharts @seekingalpha https://t.co/Bi8GsaPSt8 pic.twitter.com/bKncxGnmrf
AI Monetization Lags as Search Revenue Grows
At the center of investor anxiety is the core search business that has financed two decades of company ambitions. Revenue from Google search and related ads grew 12% to $63.4 billion during the third quarter. While query growth reached a five-year high, according to Bank of America analysts, monetization lagged behind historical norms as traffic transitioned toward AI Overviews and AI Mode.
Pivotal Research CEO Jeffrey Wlodarczak noted that bears would argue this marks the initial quarter where artificial intelligence begins to seriously harm the search business.
Google reported negative free cash flow of $9 billion in Q3, driven by massive capital expenditures on AI infrastructure (property & equipment spending up 114% YoY to $51 billion). This was Google's largest decline in free cash flow ever and only the second quarterly decline in… pic.twitter.com/W4TE11eFUC
Bank of America analysts trimmed their price target for the stock from $430 to $380, maintaining a Buy rating while pointing out that year-over-year search growth decelerated as query volumes accelerated. BofA models external sales of Google’s proprietary chips reaching $75 billion by 2027.
While query growth reached a five-year high, monetization appears to be challenged while search faces difficult comps.
Bank of America analysts, via CNBC
On the consumer front, YouTube Music and Premium surpassed 150 million subscribers worldwide.
Alphabet tanks nearly 13% for worst day ever, losing $500 billion in value https://t.co/yGq74x4X19
AI Spending Causes First Negative Free Cash Flow
While revenue missed expectations slightly, capital spending surged to $51.4 billion in the third quarter alone. The spending spree, directed primarily toward datacenters and proprietary AI chips, resulted in negative free cash flow of $9.1 billion for the quarter. To help finance these ambitions during the period, Alphabet raised $28.7 billion through bond sales and issued $12.4 billion in new shares.
Since going public in 2004, Google had not posted a single quarter of negative free cash flow until the current fiscal year. Alphabet reaffirmed its full-year capital expenditure guidance in a range of $195 billion to $205 billion for 2026 and indicated that spending will increase significantly again in 2027, with total infrastructure outlays anticipated to reach $300 billion that year according to estimates cited by financial institutions.
I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise.
Sundar Pichai, Google CEO, via The Guardian
Cloud Revenue Jumps as TPU Chip Sales Grow
Amid the financial pressures in search, Google Cloud provided a significant counterbalance. Revenue for the cloud division jumped 103% to $30.7 billion, driven heavily by sales of the company’s in-house artificial intelligence chips known as TPUs, according to The Guardian.
Alphabet has begun selling its TPU chips to outside companies. OpenAI reportedly plans to purchase some of the chips, while Bank of America models $75 billion in 2027 external sales for the hardware line, reported Fortune. The cloud division also serves as the primary destination for the company’s escalating capital expenditure as infrastructure usage ramps up.
AI giveth, AI taketh away! Alphabet plunged 12.6% in its worst session ever – a 6.5-sigma move, per Goldman Sachs. $525bn wiped out: the 2nd-largest one-day market-cap loss in history. Search revenue missed expectations, while 2027 capex is set to rise “significantly” from this… pic.twitter.com/6Sn1PpI7RF
Meanwhile, the “Other Bets” portfolio — which houses autonomous vehicle developer Waymo — generated $372m in revenue alongside an operating loss of $2 billion. Waymo now provides more than 500,000 paid rides each week across 15 U.S. metropolitan areas, with an explicit target of reaching one million weekly rides by the end of the year.
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