Alphabet shares slumped more than 10% after the search giant reported a drop in free cash flow during the third quarter, in a worrying sign for the artificial intelligence trade.

Here's how the company did, compared with estimates from analysts polled by LSEG:

Earnings per share: $2.67 adjusted vs. $3.02 expected
Revenue: $127.58 billion vs. $128.22 billion

Revenue grew 25% from a year ago, but the company posted its first top-and-bottom-line miss in nearly four years.

Net income fell to $26.17 billion, or $2.12 per share, down from $34.98 billion, or $2.87 per share, a year ago.

The Google parent reported negative free cash flow of $9.07 billion, which fell much further than the $2.70 billion expected by analysts.

As questions mount over heightened spending on the AI buildout, Alphabet's capital expenditures totaled $51.36 billion in Q3, falling short of the $55.09 billion expected by analysts. Investors are looking for a substantial return on investment to warrant the big spending plans from the hyperscalers.

Alphabet maintained its full-year capital expenditures forecast after lifting guidance to between $195 billion and $205 billion during the second quarter from $190 billion. Annual capex is expected to top $200 billion before exceeding $300 billion in 2027.

"We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call," finance chief Anat Ashkenazi told analysts during an earnings call.

The company's borrowing rose sharply during the quarter, with long-term debt climbing to $125.1 billion, up from $21.6 billion a year earlier — an increase of about 479%.

Operating income totaled $40.58 billion, missing a $43.19 billion forecast from FactSet.

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Alphabet saw a $99.03 billion windfall in revenue from equity holdings in the second quarter, fueled by stakes in SpaceX and Anthropic. However, the category weighed on results in the third quarter, resulting in a loss of $8.66 billion.

The company continues to open its wallet to fuel the AI expansion, and that has contributed to strong revenue growth in its cloud division, home to its suite of AI offerings.

"We are seeing extraordinary demand and strong growth from both AI labs, capital markets, financial service institutions, and enterprises," said Google Cloud CEO Thomas Kurian in his first public earnings call remarks.

Cloud revenue more than doubled to $30.7 billion, surpassing the $28.7 billion expected by analysts. The company has continued taking market share from larger rivals Amazon Web Services and Microsoft Azure.

The strong cloud results did little to shake off Google's largely negative print.

"The cloud business was the only business that beat at 103% growth," said Jefferies analyst Brent Thill on CNBC's Closing Bell: Overtime. "The Street wanted 100%, so it didn't beat by much, and it missed some of the high-end targets. Everything else missed."

The company's aggressive push on AI models did show signs of consumer adoption. Google said its Gemini app reached 1 billion users, making it the fastest-growing product in its history, the company said.

CEO Sundar Pichai told analysts that the company is already seeing strong demand for its recently launched Argon Gemini model. Its Carbon iteration announced on Wednesday outperforms Argon "on almost every domain," he added.

Alphabet's search revenue grew 12% to $63.35 billion. That fell short of a $64.96 billion estimate. Pichai said the company's AI investments powered the highest query growth rate over the last five years.

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Alphabet sinks 10% as it holds 2026 capex unchanged, expects significant increase in 2027