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Alphabet stock slips 18% from 52-week high as AI spending worries mount
Alphabet reported 24% year-over-year revenue growth and 82% growth at Google Cloud, but CapEx rose to $44.9 billion and free cash flow turned to a $5.9 billion outflow.
Alphabet stock closed Tuesday down just over 18% from its 52-week high, despite what MarketBeat Ratings describes as one of the company’s strongest quarters. The article notes the shares are up only about 7% for the year, with the move leaving the stock near its 200-day moving average.
Alphabet’s results included 24% year-over-year revenue growth to $119.8 billion and 12 straight quarters of double-digit growth, with Google Cloud accelerating to 82% growth to $24.8 billion. The cloud segment also saw cloud backlog rise to $514 billion, while cloud operating income more than tripled to $8.8 billion and Search grew 17%.
MarketBeat Ratings attributes the sell-off primarily to spending, saying capital expenditures reached $44.9 billion in the quarter, double the prior year. Management lifted full-year CapEx guidance to $195 billion to $205 billion from $180 billion to $190 billion, and free cash flow flipped to a $5.9 billion outflow.
The piece also points out that headline EPS of $9.11 was inflated by a $99 billion unrealized gain tied to Alphabet’s Anthropic and SpaceX stakes, estimating operational EPS near $2.87 per share. It adds that investors may want to “look through” that accounting noise when comparing valuation metrics, while a Verizon dark fiber agreement reportedly worth more than $1 billion highlights demand for AI data center connectivity.