Shares in the Google parent Alphabet fell double digits Wednesday evening into Thursday trading, erasing hundreds of billions of dollars in stock market value from the $4tn tech giant.
The company had reported lower-than-expected profit and a slowdown in its advertising business while it maintained big spending on AI.
Net profit slid 25 per cent from a year earlier to $26.2bn in the July-to-September period, or $2.12 a share, well short of expectations by analysts surveyed by FactSet.
Alphabet booked an $8.7bn loss on its equity investments, which it attributed to its stake in SpaceX, the Elon Musk-led company where shares have struggled since going public in June.
Alphabet’s revenue rose 25 per cent year-on-year to $127.6bn, although the figure fell slightly short of analysts’ expectations of about $128bn.
Advertising revenue increased 11 per cent to $82bn, missing forecasts. Google Search, the company’s largest revenue source, recorded a 12 per cent increase to $63.4bn, down from 17 per cent growth in the previous quarter.
YouTube, now the most-watched content provider on American television screens, reported a 9 per cent rise in advertising revenue to $11.2bn, slowing from 13 per cent growth in the preceding quarter. Meanwhile, YouTube Music and Premium surpassed 150 million subscribers worldwide, including users on free trials.
Google Cloud, which provides computing infrastructure and artificial intelligence tools to businesses, recorded a 103 per cent jump in revenue to $30.7bn, exceeding analysts’ expectations.
The company attributed much of the growth to strong sales of its in-house artificial intelligence chips, known as Tensor Processing Units. Operating income in the cloud division more than tripled to $11.1bn.
Google is also expanding sales of its TPU chips to external customers, intensifying its competition with Nvidia, the leading supplier of AI chips.
Alphabet’s “Other Bets” division, which includes autonomous ride-hailing company Waymo, reported revenue of $372m and an operating loss of $2bn.
Waymo now provides more than 500,000 paid rides weekly across 15 metropolitan areas in the United States. The company aims to increase this figure to 1 million rides per week by the end of the year.
Meanwhile, Alphabet’s capital expenditure rose to $51.4bn in the quarter, more than double the $24bn recorded a year earlier. Most of the spending went towards data centres and artificial intelligence chips as the technology giant continued to expand its AI infrastructure.
