Alphabet Inc., the parent company of Google, saw its shares plummet after reporting third-quarter financial results that missed Wall Street expectations. Shares sank by as much as 15.8% in after-hours trading, putting the company on course for its worst single-day drop in history.
The tech giant reported revenue of $127.6 billion, showing strong growth but falling short of analyst expectations. Net profit slid 25% from a year earlier to $26.2 billion, or $2.12 per share, while adjusted earnings were $2.67 per share. Additionally, the company reported a negative free cash flow of $11.62 billion, a more substantial drop than analysts had anticipated.
The financial miss was attributed to a slowdown in the advertising business and changes to the value of the company's investments. Investors expressed skepticism regarding the returns on Alphabet's relentless spending on artificial intelligence, raising questions about whether the massive investments are justified as the AI revolution continues. Despite the lackluster report, the company maintained its spending guidance for the year.