Alphabet: results below expectations and a fall in free cash flow; shares down 10 per cent in after-hours trading
(Il Sole 24 Ore Radiocor) - Alphabet’s share price fell by more than 10 per cent in after-hours trading after the tech giant reported a decline in free cash flow in the third quarter. Revenue rose by 25 per cent compared with the previous year – the fastest growth rate for any period since 2021 – to $127.58 billion, though this fell short of the $128.22 billion forecast by analysts.
Net profit fell to $26.17 billion, or $2.12 per share, compared with $34.98 billion, or $2.87 per share, in the previous year. Adjusted earnings per share were $2.67, compared with the consensus estimate of $3.02. Google reported a negative free cash flow of $9.07 billion, well below the $2.70 billion forecast by analysts. Whilst doubts are mounting over rising expenditure on artificial intelligence development, Google’s capital expenditure stood at $51.36 billion, below the $55.09 billion forecast by analysts.
Alphabet has maintained its full-year capital expenditure forecast, having revised it upwards in the second quarter to between $195 billion and $205 billion, compared with the $190 billion previously forecast. Annual capital expenditure is expected to exceed $200 billion, before reaching $300 billion in 2027. The company’s debt increased significantly during the quarter, with long-term debt rising to $125.1 billion, compared with $21.6 billion a year earlier – an increase of approximately 479 per cent. Operating profit stood at $40.58 billion, below the $43.19 billion forecast by FactSet. Cloud revenue more than doubled, reaching $30.7 billion and exceeding the $28.7 billion predicted by analysts. The company continues to gain market share at the expense of its larger competitors, Amazon Web Services and Microsoft Azure. The excellent results from the cloud, however, were not enough to offset the decline in Google’s overall performance. “The cloud sector was the only one to exceed expectations, with growth of 103 per cent,” Jefferies analyst Brent Thill told CNBC.
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