Alphabet falls 10%: Google Cloud doubles, profits melt and OpenAI buys its chips

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In question: earnings per share of 2.12 dollars against 3.02 expected. And 51.4 billion in investment spending in the quarter alone. The Information added the day before that OpenAI intends to buy TPUs from Google rather than betting everything on Nvidia. The crypto reader knows the rest since Meta's plunge. The AI ​​sucks up the liquidity, and Nasdaq passes the bill to Bitcoin.

Start with what is going well, there is something. For the quarter ended September 30, revenues reached $127.6 billion compared to $102.3 billion a year earlier. Operating profit climbs to 40.6 billion for a margin of 31.8%. Google Cloud did even better, with 30.7 billion in revenue (+103%) and 11.1 billion in operating profit. Its margin increased from 23.7% to 36.2% in twelve months. According to CFO Anat Ashkenazi, the cloud order backlog reaches $561 billion.

The problem is lower down. Net profit stood at $26.2 billion, down 25% year-on-year. Earnings per share fell to $2.12, when the consensus expected $3.02. The explanation lies in the “other income and expenses” line. Alphabet booked $8.2 billion in unrealized losses on SpaceX. The loss remains accounting, with no cash outflow. The Stock Exchange has not sorted it out at 10 p.m.

That's the number that sent the stock to $288 after the close. It was worth a little over $320 at the bell. Alphabet invested $51.4 billion in the third quarter, compared to $23.95 billion a year earlier (+114%). As a result, quarterly free cash flow is negative 9.1 billion. This is the money left over after the servers and data centers are paid for. Over twelve rolling months, it falls to 19.7 billion (-73%).

And it's not over. The group maintains its 2026 envelope between 195 and 205 billion dollars. He also warns that 2027 will be “significantly” higher, without giving a figure. “We build the inventory before receiving the income stream,” explained Anat Ashkenazi, who refers to a market “constrained by supply”. For his part, Sundar Pichai spoke of “strong demand for our TPU systems”, the AI ​​chips designed in-house by Google. The Gemini application has passed the billion users mark.

Machine-translated from French