Alphabet EPS misses 28% as $200bn AI capex depreciation bites into profits
SumitGup · x · 2026-10-29
Alphabet reported Q3 revenue of $127.58bn (in line), but EPS of $2.12 missed consensus of $2.94 by 28%, and operating income of $40.58bn missed by 6%.
- Most of the damage sits below the operating line: gains/losses on Alphabet's stakes in other companies, not Search, YouTube or Cloud
- The real issue is operating margin falling to 32% from 34% — roughly $200bn of AI capex is turning into depreciation that hits the income statement
- The quoted thread adds: Google Cloud grew 82% to $24.8bn last quarter with 36% margins and a $514bn backlog; Search grew 17%; AI Mode has 1bn monthly users; free cash flow went negative last quarter
The author stays bullish long-term (PT $425, Overweight) while conceding the capex burden hurts near-term profitability.
Related event: Alphabet Q3: Google Cloud Revenue Doubles, Stock Plunges Anyway(13 posts)→
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