Shares of Google’s parent company, Alphabet Inc. (Nasdaq: GOOG), could suffer a historic post-earnings loss today.
As of the time of this writing, the stock price is down more than 10% after the company reported what can only be described as disappointing results for its most recent quarter yesterday. Here’s what you need to know.
Google’s Q3 results
Yesterday, Alphabet announced its third-quarter 2026 results, which cover the three-month period that ended on September 30. On the surface, the search giant and AI hyperscaler tried to dress up the results as best as possible.
Those results included a 25% increase in consolidated revenue to $127.6 billion, a 103% increase in Google Cloud, and crossing the 1 billion milestone when it comes to Gemini app users, which makes Gemini, Google’s AI chatbot, the fastest-growing product in the company’s history.
Unfortunately for Google, its revenue increases largely fell short of investor expectations. As noted by CNBC, Google’s revenue of $127.58 billion came in below Wall Street expectations of $128.22 billion.
Worse, Google’s adjusted earnings per share (EPS) was $2.67. That was well below the $3.02 Wall Street was expecting.
After Alphabet announced its Q3 results after the closing bell yesterday, GOOG shares sank more than 10%. That loss has extended to premarket trading this morning. If it holds through the closing bell today, it will be the largest one-day post-earnings stock price fall in Google’s history.
But what’s really driving that fall? Two big things seem to be freaking GOOG investors out.
Negative free cash flow along with AI spending surge
Perhaps the biggest factor spooking investors today is that Google posted negative free cash flow for the quarter. And it was much worse than analysts expected.
Analysts had expected Google to post negative free cash flow of about $2.7 billion. Instead, Google posted a negative free cash flow more than three times larger: $9.07 billion.
Its negative cash pile largely reflects massive capital spending on AI buildouts that haven’t yet borne enough fruit to cover it. For the quarter, Google’s AI-driven capex was about $51.4 billion, which was more than $9 billion over the roughly $42.3 billion in cash Google took in.
Investors generally don’t mind large capex if the company is bringing in more than it spends. But that’s not the case with Google. Indeed, the search giant reiterated that it expects total fiscal 2026 capex to be between $195 billion and $205 billion.
In 2027, Google’s Capex could reach $300 billion as it continues to build out its AI data centers. The problem is investors now want to see a return on such investments, and so far Google’s numbers aren’t showing that.
Fears that Google Search is being supplanted by AI chatbots
The second big factor that likely spooked investors was the fact that Google’s search revenue came in at roughly $63.4 billion for the quarter. Though that represented around 12% growth, it missed Wall Street expectations by about $1.5 billion.
Worse, it added to fears that Google’s historic bread and butter may be being supplanted. With the rise of AI chatbots, Google watchers have long feared that traditional search could be upended. Instead of turning to Google to find things on the internet, people may just ask chatbots outside of the Google ecosphere.
The problem for Google is that its chatbot, Gemini, isn’t the dominant one on the web. Google has heavy competition from OpenAI’s ChatGPT and Anthropic’s Claude. If users turn to those chatbots more often for answers, it could significantly impact Google’s search revenue in the years ahead.
GOOG shares sink more than 10% in premarket
As of the time of this writing, GOOG shares are down about 10.6% to $287.74 per share. That’s a price point Google shares have not seen since April.
Worse, if the drop holds through market close today, it will be the largest single post-earnings loss in the company’s share price history. As noted by CNBC, its previous largest post-earnings drop was 9.77%.
Such a drop could represent a psychological threshold that weighs heavily on investors’ minds as they continue to worry about capital expenditures and the impact of AI on one of the tech industry’s biggest giants.
