Alphabet (NASDAQ:GOOG) Stock Price Down 12.3% on Disappointing Earnings

Key Points

• Alphabet shares plunged 12.3% after quarterly EPS came in at $2.12, well below the $3.01 consensus estimate; revenue of $127.58 billion also narrowly missed forecasts despite growing 24.7% year over year.
• Google Cloud delivered strong growth, with revenue more than doubling and operating margins expanding, but investors remained concerned about roughly $51.4 billion in capital expenditures, negative free cash flow, and the uncertain returns on AI infrastructure spending.
• Analyst sentiment remains broadly positive, with a “Moderate Buy” consensus and average price target of $412.05, although some firms downgraded the stock or lowered their targets following the disappointing results.

Alphabet Inc. (NASDAQ:GOOG - Get Free Report)'s stock price was down 12.3% on Thursday after the company announced weaker than expected quarterly earnings. The stock traded as low as $278.29 and last traded at $282.32. 91,798,694 shares traded hands during mid-day trading, an increase of 347% from the average session volume of 20,542,471 shares. The stock had previously closed at $321.89.

The information services provider reported $2.12 earnings per share for the quarter, missing the consensus estimate of $3.01 by ($0.89). Alphabet had a net margin of 54.77% and a return on equity of 51.32%. The business had revenue of $127.58 billion during the quarter, compared to analysts' expectations of $127.97 billion. During the same period in the previous year, the business earned $2.87 EPS. The business's revenue was up 24.7% on a year-over-year basis.

Alphabet News Summary

Here are the key news stories impacting Alphabet this week:

• Positive Sentiment: Google Cloud revenue more than doubled year over year to approximately $30.7 billion, while operating income tripled and margins expanded to 36.2%. Backlog increased to roughly $561 billion, supporting the long-term case for Alphabet’s cloud and AI investments. Alphabet's Cloud Business Just Doubled
• Positive Sentiment: Revenue rose 24.7% year over year to $127.6 billion, and search query growth reached its strongest rate in five years. Analysts who remain bullish argue that Alphabet’s valuation, advertising franchise and growing cloud business could create a long-term buying opportunity. Alphabet: Generational Buy Opportunity
• Neutral Sentiment: OpenAI reportedly plans to purchase Google’s custom TPU chips, potentially expanding Alphabet’s AI infrastructure business and reducing reliance on Nvidia. However, the commercial impact and deal terms remain uncertain. OpenAI Reportedly Plans to Buy Google's AI Chips
• Negative Sentiment: Alphabet reported adjusted EPS of $2.12, well below expectations near $3.00, while revenue also narrowly missed forecasts. An approximately $8.7 billion unrealized investment loss, largely tied to its SpaceX stake, significantly pressured reported profit. Alphabet Q3 Earnings Report
• Negative Sentiment: Capital expenditures reached about $51.4 billion and quarterly free cash flow turned negative by roughly $9.1 billion. Investors are questioning whether Alphabet can generate sufficient returns from its AI infrastructure spending, particularly as debt and other potential AI obligations increase. Alphabet Falls After Earnings
• Negative Sentiment: Search and YouTube advertising growth was weaker than expected, reinforcing fears that AI chatbots and AI-generated search results could reduce direct user engagement or shift Alphabet toward lower-margin queries. Analysts have consequently flagged slower search growth and margin pressure. Alphabet Earnings Reflect AI Pressure on Search

Analyst Ratings Changes

GOOG has been the topic of a number of research analyst reports. Citizens Jmp downgraded Alphabet from a "mkt outperform" rating to a "market perform" rating in a report on Thursday. Scotiabank restated a "sector outperform" rating and set a $375.00 price objective (down from $450.00) on shares of Alphabet in a research report on Thursday. Sanford C. Bernstein reiterated a "market perform" rating and set a $325.00 price objective on shares of Alphabet in a research report on Thursday. Susquehanna restated a "positive" rating and set a $400.00 price objective on shares of Alphabet in a report on Thursday. Finally, Tigress Financial upped their target price on Alphabet from $415.00 to $485.00 and gave the stock a "strong-buy" rating in a report on Friday, September 18th. Six analysts have rated the stock with a Strong Buy rating, thirty-five have assigned a Buy rating, five have issued a Hold rating and one has issued a Sell rating to the company. According to data from MarketBeat, the company presently has a consensus rating of "Moderate Buy" and an average price target of $412.05.

Insider Buying and Selling at Alphabet

In other Alphabet news, Director Frances Arnold sold 83 shares of the company's stock in a transaction on Wednesday, September 30th. The stock was sold at an average price of $340.45, for a total transaction of $28,257.35. Following the transaction, the director directly owned 19,076 shares in the company, valued at $6,494,424.20. This represents a 0.43% decrease in their ownership of the stock. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which is available at the SEC website. Insiders own 12.99% of the company's stock.

Institutional Inflows and Outflows

Several institutional investors and hedge funds have recently added to or reduced their stakes in GOOG. BlackRock Inc. grew its position in shares of Alphabet by 1.4% during the 2nd quarter. BlackRock Inc. now owns 369,922,502 shares of the information services provider's stock worth $130,704,718,000 after buying an additional 5,164,200 shares during the period. State Street Corp grew its position in shares of Alphabet by 2.8% during the 2nd quarter. State Street Corp now owns 190,923,442 shares of the information services provider's stock valued at $67,458,980,000 after acquiring an additional 5,208,690 shares during the period. Amundi raised its stake in Alphabet by 22.9% in the 1st quarter. Amundi now owns 21,922,379 shares of the information services provider's stock valued at $6,288,654,000 after acquiring an additional 4,083,758 shares during the period. Deutsche Bank AG lifted its position in shares of Alphabet by 5.6% during the second quarter. Deutsche Bank AG now owns 17,313,729 shares of the information services provider's stock worth $6,117,460,000 after acquiring an additional 913,666 shares in the last quarter. Finally, Wellington Management Group LLP lifted its holdings in shares of Alphabet by 24.9% in the second quarter. Wellington Management Group LLP now owns 17,209,454 shares of the information services provider's stock worth $6,080,616,000 after buying an additional 3,432,287 shares in the last quarter. Institutional investors and hedge funds own 27.26% of the company's stock.

Alphabet Stock Performance

The company has a 50-day moving average of $338.12 and a 200 day moving average of $338.76. The firm has a market capitalization of $3.45 trillion, a PE ratio of 14.18, a PEG ratio of 0.91 and a beta of 1.19. The company has a quick ratio of 2.64, a current ratio of 2.72 and a debt-to-equity ratio of 0.16.

About Alphabet

Alphabet Inc is a technology holding company best known as the parent organization of Google. Founded in 2015 through a corporate restructuring, Alphabet oversees Google and a collection of businesses focused on technology, online services, communications, artificial intelligence, and other emerging areas.

Google's principal products and services include its internet search engine, digital advertising platforms, YouTube, Android, Chrome, Google Maps, Google Play, and Google Workspace. The company also provides cloud computing, data storage, cybersecurity, productivity, and artificial intelligence services through Google Cloud.

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