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Alphabet Stock Slides on Earnings Woes: ETFs in the Limelight
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Key Takeaways
Alphabet missed Q3 earnings and revenue estimates, sending shares sharply lower in premarket trading.
Alphabet's cloud growth remains strong, but search weakness weighs on sentiment.
Rising capex and two consecutive quarters of negative free cash flow raised investor concerns.
Alphabet (GOOGL - Free Report) came up with disappointing third-quarter 2026 earnings on Oct. 28, after market close. Earnings of $2.12 per share came in below the Zacks Consensus Estimate of $2.94 by 27.89%. The bottom line fell 26.13% from earnings of $2.87 per share recorded in the same period last year.
GOOGL shares declined about 11.5% in pre-market trading on Oct. 29 as the company missed revenue and earnings estimates. Negative free cash flow and disappointing performance in its core search advertising business left investors disappointed.
Snapshot of Q3 Earnings
Alphabet posted revenues of $111.21 billion for the quarter ended September 2026, failing to beat the Zacks Consensus Estimate of $111.8 billion by 0.53%. However, revenues increased 27.14% from the year-ago quarter.
Alphabet’s net income for the quarter fell about 25.18% from the year-ago quarter to $26.17 billion. However, the tech giant’s operating income for the quarter was $40.58 billion, which marked an increase of 29.93% from the year-ago quarter.
Segment Snapshots
Third-quarter revenues from Google advertising reached $82.01 billion, up 10.56% from the year-ago quarter. The segment’s revenues missed the Zacks Consensus Estimate of $83.52 billion by 1.81%. The segment includes Google Search & other, YouTube ads and Google Network.
Revenues from Google Search & other, which reached $63.35 billion in the third quarter, marked a rise of nearly 12% from $56.57 billion in the year-ago quarter. YouTube ad revenues increased 9.22%, to reach $11.21 billion in the third quarter.
However, revenues from both Google Search & other and YouTube ads lagged the Zacks Consensus Estimate by 2.53% and 1.21%, respectively. According to Yahoo Finance, the disappointing performance of the search business raised investor nervousness. As per the article, the revenue miss fueled concerns that Google's search dominance could face growing competition from AI chatbots such as Claude and ChatGPT, despite the company's massive investments in AI.
Revenues from Google Services, which includes Google advertising and Google subscriptions, platforms and devices, increased 10.63% from the year-ago quarter, reaching $96.3 billion. Operating income from the segment reached $39.16 billion for the quarter ended September 2026, marking an increase of 16.79% from the prior-year figure of $33.53 billion.
Alphabet’s Google Cloud business witnessed a substantial surge, with operating income increasing to $11.12 billion, an impressive 209.43% increase from the prior-year figure of $3.59 billion. Revenues from the Cloud segment also witnessed a substantial rise of 102.61% year over year to $30.71 billion. The segment’s revenues surpassed the Zacks Consensus Estimate of $29.16 billion by 5.32%.
Google Cloud posted record growth, driven by strong performance across Google Cloud Platform (GCP), enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.
Alphabet's Capex Surge and Cash Burn Worry Investors
Alphabet reported capital expenditures of $51.36 billion for the quarter ended September 2026, up nearly 114.4% from $23.95 billion in the year-ago quarter. The company's capital expenditures totaled $131.95 billion in the first nine months of the year, up from $63.59 billion in the same period last year.
Alphabet kept its 2026 capital expenditure forecast unchanged at $195 billion to $205 billion, following an increase from $190 billion in the second quarter. The company expects capex to top $200 billion this year and climb above $300 billion in 2027, as per a CNBC article. The company’s chief financial officer, Anat Ashkenazi, told analysts during an earnings call that Alphabet expects capital expenditures to increase significantly in 2027, as quoted on the abovementioned CNBC article.
As investors grow increasingly concerned about negative free cash flow across Big Tech, GOOGL reported negative free cash flow of $9.06 billion in the third quarter, worse than Wall Street estimates and marking its second consecutive quarter of negative free cash flow in 2026, following a deficit of $5.86 billion in the second quarter.
Alphabet’s Stock Outlook
Alphabet currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 54 brokerage firms.
The current ABR remains unchanged from a month ago and signals favorable analyst sentiment toward the tech giant. However, sluggish third-quarter results and expectations of a disappointing fourth quarter could prompt analysts to reassess their outlook.
Of the 54 recommendations deriving the current ABR, 47 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 87.04% and 5.56% of all recommendations, remaining unchanged from a month ago.
Based on short-term price targets offered by 51 analysts, the average price target for Alphabet comes to $432.69, ranging from a low of $350.00 to a high of $515.00. The average price target represents an increase of 33.18% from the last closing price of $324.89 (as of market close on Oct. 28). The tech giant has a Zacks Rank #3 (Hold) and a Momentum Score of A.
View the Zacks #1 Rank List
Image: Bigstock
Alphabet Stock Slides on Earnings Woes: ETFs in the Limelight
Key Takeaways
Alphabet (GOOGL - Free Report) came up with disappointing third-quarter 2026 earnings on Oct. 28, after market close. Earnings of $2.12 per share came in below the Zacks Consensus Estimate of $2.94 by 27.89%. The bottom line fell 26.13% from earnings of $2.87 per share recorded in the same period last year.
GOOGL shares declined about 11.5% in pre-market trading on Oct. 29 as the company missed revenue and earnings estimates. Negative free cash flow and disappointing performance in its core search advertising business left investors disappointed.
Snapshot of Q3 Earnings
Alphabet posted revenues of $111.21 billion for the quarter ended September 2026, failing to beat the Zacks Consensus Estimate of $111.8 billion by 0.53%. However, revenues increased 27.14% from the year-ago quarter.
Alphabet’s net income for the quarter fell about 25.18% from the year-ago quarter to $26.17 billion. However, the tech giant’s operating income for the quarter was $40.58 billion, which marked an increase of 29.93% from the year-ago quarter.
Segment Snapshots
Third-quarter revenues from Google advertising reached $82.01 billion, up 10.56% from the year-ago quarter. The segment’s revenues missed the Zacks Consensus Estimate of $83.52 billion by 1.81%. The segment includes Google Search & other, YouTube ads and Google Network.
Revenues from Google Search & other, which reached $63.35 billion in the third quarter, marked a rise of nearly 12% from $56.57 billion in the year-ago quarter. YouTube ad revenues increased 9.22%, to reach $11.21 billion in the third quarter.
However, revenues from both Google Search & other and YouTube ads lagged the Zacks Consensus Estimate by 2.53% and 1.21%, respectively. According to Yahoo Finance, the disappointing performance of the search business raised investor nervousness. As per the article, the revenue miss fueled concerns that Google's search dominance could face growing competition from AI chatbots such as Claude and ChatGPT, despite the company's massive investments in AI.
Revenues from Google Services, which includes Google advertising and Google subscriptions, platforms and devices, increased 10.63% from the year-ago quarter, reaching $96.3 billion. Operating income from the segment reached $39.16 billion for the quarter ended September 2026, marking an increase of 16.79% from the prior-year figure of $33.53 billion.
Alphabet’s Google Cloud business witnessed a substantial surge, with operating income increasing to $11.12 billion, an impressive 209.43% increase from the prior-year figure of $3.59 billion. Revenues from the Cloud segment also witnessed a substantial rise of 102.61% year over year to $30.71 billion. The segment’s revenues surpassed the Zacks Consensus Estimate of $29.16 billion by 5.32%.
Google Cloud posted record growth, driven by strong performance across Google Cloud Platform (GCP), enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.
Alphabet's Capex Surge and Cash Burn Worry Investors
Alphabet reported capital expenditures of $51.36 billion for the quarter ended September 2026, up nearly 114.4% from $23.95 billion in the year-ago quarter. The company's capital expenditures totaled $131.95 billion in the first nine months of the year, up from $63.59 billion in the same period last year.
Alphabet kept its 2026 capital expenditure forecast unchanged at $195 billion to $205 billion, following an increase from $190 billion in the second quarter. The company expects capex to top $200 billion this year and climb above $300 billion in 2027, as per a CNBC article. The company’s chief financial officer, Anat Ashkenazi, told analysts during an earnings call that Alphabet expects capital expenditures to increase significantly in 2027, as quoted on the abovementioned CNBC article.
As investors grow increasingly concerned about negative free cash flow across Big Tech, GOOGL reported negative free cash flow of $9.06 billion in the third quarter, worse than Wall Street estimates and marking its second consecutive quarter of negative free cash flow in 2026, following a deficit of $5.86 billion in the second quarter.
Alphabet’s Stock Outlook
Alphabet currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 54 brokerage firms.
The current ABR remains unchanged from a month ago and signals favorable analyst sentiment toward the tech giant. However, sluggish third-quarter results and expectations of a disappointing fourth quarter could prompt analysts to reassess their outlook.
Of the 54 recommendations deriving the current ABR, 47 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 87.04% and 5.56% of all recommendations, remaining unchanged from a month ago.
Based on short-term price targets offered by 51 analysts, the average price target for Alphabet comes to $432.69, ranging from a low of $350.00 to a high of $515.00. The average price target represents an increase of 33.18% from the last closing price of $324.89 (as of market close on Oct. 28). The tech giant has a Zacks Rank #3 (Hold) and a Momentum Score of A.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ETFs to Explore
Here, we have highlighted ETFs with heavy exposure to Alphabet.
Global X PureCap MSCI Communication Services ETF (GXPC - Free Report) has an exposure of 31.49% to GOOGL.
VanEck Communication Services TruSector ETF (TRUC - Free Report) has an exposure of 14.86% to GOOGL.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report) has an exposure of 14.06% to GOOGL.
Vanguard Communication Services ETF (VOX - Free Report) has an exposure of 13.97% to GOOGL.
iShares Global Comm Services ETF (IXP - Free Report) has an exposure of 13.12% to GOOGL.
State Street Communication Services Select Sector SPDR ETF (XLC - Free Report) has an exposure of 12.49% to GOOGL.