The miss was driven by its core ad business. Google Services revenue came in at $96.3B vs $98.5B expected. Google Search revenue was $63.35B vs $64.96B expected, and total advertising was $82.01B vs $83.5B expected. YouTube ads at $11.21B also slightly missed.
Profit took a bigger hit. EPS was $2.12 vs $3.02 expected, hit by an $8.7B loss on equity investments and surging AI capex. Net income fell to $26.2B from $35B a year ago. Operating income of $40.58B missed FactSet's $43.19B forecast, and free cash flow dropped to $9.07B.
The bright spot was Google Cloud, which more than doubled to *$30.71B*, beating the ∼$29.1B forecast with 103% growth. Alphabet said Gemini app has now passed 1B users, its fastest-growing product ever.
But with capex at $51.36B for the quarter and full-year capex guidance up to $195-205B, investors questioned whether massive AI spending is translating to profit. The sell-off rattled Big Tech as ad growth slows.