Google's quarterly figures disappoint: Alphabet share plummets 11%

The share of Alphabet, the parent company of Google, fell by almost eleven percent on Wednesday evening after the publication of the quarterly figures. The company earned less than expected and investors are increasingly concerned about the huge amounts Google spends on artificial intelligence.

Alphabet generated revenue of $111.2 billion in the third quarter, slightly less than analysts had expected.

Advertising revenue, in particular, disappointed. Google raised 82 billion dollars, while analysts expected 83.6 billion dollars. The search engine, one of the company's main sources of income, also yielded less than expected.

In terms of profit, the difference was even greater. Alphabet earned $2.12 per share, while Wall Street assumed $2.99.

This was mainly due to a loss of $8.7 billion on investments in other companies. In particular, the interest in the space company SpaceX was weighing heavily on profits. Remarkable, because previously these investments yielded billions to Google.

Investors reacted shocked to the figures. Following the closure of Wall Street, Alphabet shares fell by almost eleven percent.

Investors are particularly concerned about the huge sums Google is investing in AI. The company expects to spend up to $205 billion this year, more than twice as much as last year.

That money goes to new data centers, among other things. These are necessary to keep AI services running and to cope with the growing demand from companies and consumers.

The demand for those services is certainly there. Google Cloud saw revenue increase 103 percent to $30.7 billion. Also, earnings of $11.1 billion were higher than analysts had expected.

Still, that doesn't take away the worries. Google is investing more and more money in AI, but it is still unclear how much the company will ultimately earn from it.

That problem also applies to the search engine. Google is increasingly responding directly to users with AI, reducing the number of clicks on traditional search results.

During a conversation with analysts, Google acknowledged that it is earning less from searches via AI mode for the time being. That's a sensitive point, as search engine advertising is one of the company's main sources of revenue.

According to Investing.com analyst Thomas Monteiro, Google must now show that its AI strategy also works financially. Otherwise, according to him, the company risks losing ground to competitors.

That competition is fierce. Companies such as OpenAI and Anthropic are rapidly bringing new AI applications to the market. Google is trying to keep up with its own Gemini models.

CEO Sundar Pichai announced on Wednesday that more AI models will appear soon. Among other things, they need to be faster and cheaper, so that companies can use them more easily.

In the meantime, Alphabet's financial obligations continue to increase. At the end of the third quarter, the company had $924 billion in future purchase commitments. In addition, an additional 152 billion dollars in rental obligations and other obligations were added.

Together, it's more than $1,000 billion. Google does not have to pay that amount in one go, but it does show how much money the company has committed for the coming years.