Alphabet Boosts Revenue While Restructuring Savings and Investments Push Profit Down

Google's parent company, Alphabet, announced that in the third quarter its profit decreased by 25% to $26.1 billion due to massive spending on artificial intelligence infrastructure and investment valuation changes, while its revenue increased by 25% to reach $127.6 billion with the support of its cloud business.

Alphabet plans to increase its spending on artificial intelligence infrastructure significantly next year. The company reported spending $51.4 billion in the third quarter for data centers supporting artificial intelligence and other business areas. While its spending forecast for the year remains steady between $195 billion and $205 billion, Google Chief Financial Officer Anat Ashkenazi stated that artificial intelligence spending will increase markedly in 2027.

The revenue growth was partially supported by the cloud business, which rents out computing power to other artificial intelligence firms and generated $30.7 billion in revenue, a 103% increase compared to the previous year. However, total revenue fell slightly short of Wall Street estimates due to rising costs. While the company's free cash flow dropped to negative $9 billion, value changes in investments in SpaceX and other companies played a role in the 25% decline in profit. Following the announcements, Google shares lost more than 11% in after-hours trading.