Alphabet Inc., the parent of Google, saw its shares tumble in after-hours trading on October 28, 2026, after announcing lacklustre third quarter results. While revenues grew well and Google Cloud saw a large boost to revenues, investors were worried about slower search ad growth, increased AI investment and lower profitability.

Why did Alphabet’s share price fall in October 2026?

Alphabet share prices fell after the group posted weaker than expected third quarter results. Alphabet reported revenues for the July-Sept 2026 period grew by 25% to around $127.6 billion. However, this was not enough to match analyst expectations.

The company also saw net income fall to $26.17 billion from $34.98 billion for the same quarter last year. This caused Google parent Alphabet’s shares to fall around 9-10% in after hours trading. [Business Standard]

Weaker Google search advertising

One big reason why Alphabet shares fell was because its advertising revenue from Google search was weaker than expected. While Google search still provides a large chunk of revenue for the company, investors and advertisers are watching how artificial intelligence is impacting search.

The group’s advertising revenue was around $82 billion in the third quarter. This was below analyst expectations. Its search advertising growth also slowed down. This is because more consumers are using artificial intelligence search features like Google’s AI Mode. This poses questions about how Alphabet will make money from advertising.

This has led to increased conversation regarding Alphabet’s advertising revenues, artificial intelligence search, digital advertising and online search.

Increased AI investment causing pressure on cashflow

Alphabet is investing heavily in its AI infrastructure such as advanced chips, data centres and cloud computing. While this could help its business grow in the long term, it is placing pressure on the company’s finances in the short term.

The company reported negative free cashflow of around $9.1 billion for the quarter, as substantial capital expenditure and operating costs weighed on cash generation. Alphabet also indicated that its capital expenditure could increase significantly in 2027, following its projected investment of $195 billion to $205 billion in 2026.

Investors are worried that the large investment in artificial intelligence will not provide good returns. As competition increases between the big tech companies, investment in AI infrastructure, artificial intelligence, data centres and technology stocks are key talking points.

Strong performance from Google Cloud

Despite the disappointing results, Google Cloud had a strong performance. Revenues from its cloud computing division nearly doubled to $30.7 billion. This was above analyst expectations.

This shows demand for cloud computing is growing. Alphabet is also investing in its own Tensor Processing Units (TPUs) and other AI technologies which is helping drive growth.

However, despite a strong performance from Google Cloud, the company still saw weaker advertising revenues and concerns over increased investment. Investors will be looking to see if Alphabet can make money from Google Cloud, demand for enterprise AI and monetising artificial intelligence in the long term.

How is Artificial Intelligence impacting Google?

Artificial intelligence is having a huge impact on the technology industry. AI assistants, chat search and generative AI are changing how we find information.

Alphabet is investing in more AI to compete with other technology companies. However, it needs to ensure that the new AI features are generating sustainable revenues and not impacting its advertising model.

Investors will be looking to see if Alphabet can generate new revenues quickly through its AI strategy. Its future performance may depend on it getting this balance right between innovation, advertising growth, cloud computing and costs.

What to watch out for

Investors will be watching out for Alphabet’s upcoming results, Google Search advertising growth, Google Cloud revenues, AI infrastructure investment and free cashflow. They will also be looking to see if Alphabet’s investment in AI is leading to more demand.

While the recent fall in the share price indicates concerns over earnings and spending, this doesn’t necessarily mean that Alphabet’s business is going to get worse in the long term. The future performance of the share price will depend on how the company is performing financially, what the market is expecting, competition and returns from its AI investment.

Before investing, investors should look at the fundamentals of the company and what is being disclosed financially. You should also consider your own risk tolerance.