Google Cloud revenue doubled. Alphabet’s shares still fell.
Search revenue growth slowed, and Google said its AI Mode earns less per search than traditional Search. That puts a question behind its AI spending: how much of the growth turns into profit?
Alphabet’s Growth Comes With an Earnings Gap
Search revenue grew 12%, down from 17% in the previous quarter. Google said query growth was its strongest in five years.
More people are searching, and Cloud is growing fast. But Google says an AI Mode search earns less than a traditional Search query. Alphabet also had another quarter of cash burn.
Reuters reported a 10% share decline. The Financial Times described a 13% tumble on Thursday. Those reports use different figures, but both describe a sharp fall despite the Cloud result.
Alphabet kept its 2026 capital spending guidance at $195 billion to $205 billion. It expects spending to rise significantly again in 2027.
One commentator argues that Alphabet’s stock deserves a lower valuation until Google closes the earnings gap between AI answers and traditional Search ads. The company has strong signs of demand. The question is whether it can earn as much from the new kind of search.
Funding AI and Earning From It
Microsoft got a different response. Azure grew 48%, capital spending came in below expectations, and its shares rose in extended trading. The company has also started a 10-part US dollar bond offering.
Reuters reported that investors rewarded Oracle for showing it could fund its AI plans without repeatedly raising money from investors. With spending plans this large, the ability to pay for them is part of the story. Even so, Nasdaq 100 futures pointed to an opening 1.3% lower after the Alphabet and Microsoft reports.
Meta’s new personal AI agent app shows another part of the profit question. Powered by Muse Spark, it has a free tier and planned subscriptions of $20 or $100 a month, depending on usage. Meta says the agent can book appointments and fill out forms. It says the agent asks before sensitive actions and cannot see users’ actual passwords or payment details.
Users must opt out if they do not want their interactions used to train Meta’s AI models. Meta is also exploring revenue from agent shopping transactions, but has no concrete plan yet. Its CEO has cited personal agents as one reason for heavy data center spending. The app arrives while Meta faces privacy and safety scrutiny, including a settlement of nearly $17 billion with state attorneys general.
Samsung is already seeing large chip profits. It reported its fourth straight quarter of record earnings. Revenue more than doubled to $145.5 billion, and operating profit rose nearly ninefold to $80.1 billion. Chips supplied about $79.4 billion, or about 99% of that operating profit, while its phone and home appliance businesses posted small losses.
Investors were still disappointed. Net profit of $56.0 billion missed the $64.2 billion estimate. Bloomberg reported that Samsung raised spending plans as AI demand lifted memory prices, but chip profit missed expectations. Shares fell about 4% after Samsung deferred shareholder payout plans until January.
Elsewhere, Intel forecast weaker than expected revenue and profit margins. Bloomberg reported that Marvell is in advanced talks to buy data center optics maker Lumentum. Banks delayed plans to sell part of a $15 billion loan for an Anthropic linked Texas data center while the state assesses power grid risks.
Growth Is Strong, but Prices Are Rising
The US economy grew at a 3.4% annualized rate in the third quarter, above the 3.2% forecast. The growth report credited consumer spending and AI related business investment. Bank of America card spending rose 6.0% from a year earlier in the week to October 24, up from 4.9% previously.
The spending figures look strong. The income figures are less comfortable. September PCE inflation was 3.6% from a year earlier, and core PCE was 3.1%. After-tax income adjusted for prices fell 0.3% in September. People spent 0.5% more in dollars but bought almost nothing more after accounting for prices.
The Fed held rates at 3.75% to 4.00% in a 10 to 2 vote. Two members preferred a hike. Traders priced roughly an 80% chance of a 25 basis point hike in December. Goldman expects that hike to be the last, though it says March is also possible. The European Central Bank held its deposit rate at 2.5%.
Oil adds another risk. Prices fell on hopes of renewed Iran peace talks, but Brent was still near $114 and WTI near $101 to $102. Iran’s IRGC Navy claimed three tankers hit mines in the Strait of Hormuz. France said Europe plans to release 42 million barrels of oil.
Shell announced a $5 billion buyback after record refining margins tied to the Iran war and Russia-Ukraine conflict. JPMorgan’s market desk remained tactically bullish, while naming increased Middle East fighting as its main risk.
Other Company Moves and Household Savings
ServiceNow fell 18.1% after its fourth-quarter contract backlog forecast missed the average analyst estimate. DoorDash plans to buy Instacart for $65 a share in cash and stock, with debt helping to fund the $17 billion deal. Deutsche Telekom decided against a formal bid for T-Mobile US for now, partly because of works council pushback.
The US government placed an effective import ban on BGI Group and two related entities under its forced labor law. House Democrats asked President Trump to preserve conversations with Grok and other AI bots.
One prominent investor forecasts possible Zoetis returns of 15% a year for 15 years. He also sees it as a short-term move into value if the AI boom turns into a bust. A separate commentator cited about $2 billion in annual cash flow, a $42 billion market value and 12 new drugs in the pipeline. Zoetis slightly cut its revenue and net income guidance.
Fidelity reported that average 401(k) balances rose 10.5% from March through June. Participants saved an average 14.4% of pay, including employer contributions, just below Fidelity’s recommended 15%.