$GOOGL · Meet Kevin · 2026-10-28

Google and Microsoft have just announced their earnings. One of them suffered a crushing defeat. Spoiler alert, it's Google. She is currently experiencing a major shock.

Oh my god, people thought he made a bargain when he bought some Google shares at a discount of approximately 7% in the $356 range. And here we are at $293 in post-closing trading.

What happened to cause a $4 trillion company to plummet by 8.7%? During the day?

Here's what happened at Google. It's all about disappointment with expectations. Search revenue declined by 2.3%. There is a possibility that they are trying to lie to us.

But they don't tell us that searches have risen year-on-year to their highest rate in the past five years. They use specific wording, and I think there's a reason for that. They say our investments are driving overall growth in search queries, including business queries.

In fact, our annual growth rate is the highest we have seen in the past five years.

Well, it turns out that "queries" are slightly different from "searches". I believe, correct me if I'm wrong, that queries include AI overview chats and AI mode in addition to traditional searches.

So, take note, coffee cups for sale for Christmas. Good. A type of search engine optimization that is very rich. Now, I'll get those promoted results right at the top. But let's say I want to chat with an AI summary.

Let's go in here. Look, this is where they're trying to insert some of those promoted results here.

The question is, is this a promotion? Let's go in and talk to her. Oh, are these...which one is safe to use in the microwave? Let's just see. Then we will look at the profits and we will see a difference here between Microsoft and Google.

Therefore, the options are confirmed separately. Microwave safe, blah blah blah blah blah blah blah blah. Well, we don't know which of these is a promoter versus an actual ad list.

Are these the results being promoted in the chat and what investors want? No, these are not promoted results.

Look, this means no share for Google unless you're lying to me, of course. But the point is in these chats, and this was my suspicion, none of this is promoted in the chat.

Why is that a problem? Well, that's a problem because Google makes the vast majority of its money from search ads.

It's here. Google search, other YouTube ads, and the Google network. Google's network or similar to ads on websites. Growth there has essentially stopped. There is virtually no growth here.

YouTube ads rose by only 9.2% in an election cycle. This is madness. Well, that's crazy. In an election cycle, this is more like normal general growth or even slower-than-normal growth, you know.

Then Google's search came in positive at 11.9% technically, but it disappointed expectations. Why does this matter? It matters because 75% of Google's total revenue comes from advertising.

Of that 75%, 73% are search ads and websites. In other words, a huge portion of their total revenue, more than half, comes from those simple search queries.

So when they tell you, "Oh yes, search queries are at an all-time high," it implies that "AI search ads must be at an all-time high too, right?" Not necessarily, my friend. Because they do not have funded results in this chat.

Once you enter this chat, you are blocked from seeing all other ads. So, you are essentially eating yourself, and that is dangerous.

And I think that's what investors are reacting to to some extent, because that's the biggest part of the business that has performed really well so far. You know, a lot of people, including me, are saying, "Man, AI isn't going to be good for Google."

"This looks like it will kill Google search, doesn't it?"

In fact, in 2023, 2024, 2025, and even now in 2026, Google's search revenue has grown consistently and repeatedly. Their performance was really good.

Some people claim that what is happening is that Google is doing everything it can to place more ads and charge more money for ads in order to extract the last stage of growth in search.

I think this is why a 2.3% drop in Google search volume seems minor, but look at the missing ad components. Search volume is down by 2.3%. Advertising revenue decreased by 1.9%.

Google's advertising revenue is down 1.9%. Services decreased by 2.1%, which includes subscriptions to skip ads. Therefore, operating income decreased by 6%.

Now the cloud has prevailed, and that's fantastic. This is their return on investment in their Tensor Processing Units (TPUs) or other units, capital expenditures, or otherwise. That's great, isn't it?

They are still investing in artificial intelligence. This is not a sign that the AI industry is going to stop. Google raised its capital expenditure guidance by 4% for this year, but the timing of their payouts and shift towards leasing, as well as some TPU unit sales they made, created a gap in the timing of this result.

I think this actually pertains to the third quarter. It confuses me a little because they just announced the third quarter results. Here we are. Therefore, this led to a decline in performance here.

In other words, they are still spending more, but the timing did not show in this quarter. So people are asking, "Oh my God, are they cutting capital expenditures?" They are spending more; The problem is that they are generating less advertising revenue than expected, and that is the source of concern.

Now, there's something else they do, and I see it as very similar to Anthropic, which is they come here and separate this video...

Silo, to start with the end of this, they come here and separate the Alphabet level activities. This essentially represents AI research and development, where they boast on the earnings call about how great their new "Arjun" model is.

Yes, Arjun and Carbon, one of which is leading the "Hugging Face" platform. It doesn't appear on OpenRange, which focuses on open weights, but they boast that their new AI model, Carbon, is Google's most powerful and is being tested with the government.

It surpasses Arjun, and is the first to be rolled out to cybersecurity partners. They are achieving tremendous success.

These models are fantastic, and there's a lot to say about this topic. This is amazing. But the investment they are making in that shows up here as a $7.6 billion loss in research and development, in addition to the negative cash flow we are seeing.

If we move on to cash flow, we are now in a negative cash flow situation. Last year, we had a positive cash flow of $25 billion. We are now at a negative cash flow of $9 billion.

Last year, they repurchased $11.5 billion worth of shares. This year, or this quarter, they issued $29 billion in debt and $12.3 billion in equity. Therefore, they absorb liquidity instead of generating it.

They are experiencing negative cash flow. They are raising their capital spending guidelines. The majority, responsible for more than half of the work, lacks expectations.

So, when people ask, "Oh my God, why is Google's stock dropping? Are they going to go bankrupt?" No, they will not go bankrupt. They have $126 billion in cash. Or excuse me, last year they had $126 billion in cash.

They now actually have $256 billion. They have a lot of cash on hand. They have bills totaling $125 billion. They also have another $191 billion in long-term debt. They have a lot of criticism to deal with this.

They still expect capital spending of between $19.5 billion and $25 billion for this year. To be fair, some projections were around $22 billion. So some people say: I don't know, do I mean that they increased spending but we expected them to increase it more?

Yes, it has increased by 4%, but there was a belief that it would increase further to reach 202 billion. That would have been about an additional 1%. Therefore, there may be a 1% decline compared to some analysts' forecasts.

Their remaining performance commitments, and order book, is $561 billion, which is a very strong figure. This is very good and excellent.

On Google, the exact opposite happens. At Google, we find that the majority of the work did not live up to revenue expectations, while the smaller part ended up growing.

We have this promising line that we hope to regain tomorrow at the $296 level in favor of Google. Google has the potential to negatively impact the wider market, but I sincerely believe that the data we are getting indicates that the AI boom is continuing in full force.

The problem is not the artificial intelligence boom. The problem lies with Google itself.

I am not trying to criticize Google. This has been a concern of mine for some time. That's why I don't own any shares in Google. And I want to be very transparent here. I do not own Google shares.

I think what we're seeing here is a sign that Google is already being disrupted by the very same burgeoning AI software .

We are somewhat expanding our investments in the AI portfolio, excluding Google. There is no Google, but we are deliberately expanding because we believe that artificial intelligence will truly elevate the biggest companies, but we do not want those qualitative risks that Google faced.

Remember that Google has outstanding performance commitments of ...where the hell were they? It was somewhere around $561 billion. Google also says in its earnings call that they have more than $1 trillion in revenue.

Oh my God, in future commitments, leases, and purchases.

So, this is Google, let's type this in. Google announces that they have over one trillion in AI-related lease and purchase commitments . Oh my God, this is crazy. But I mean, this illustrates just how diverse this AI boom is.

So, okay, this gives us an analysis of Google and an analysis of Microsoft. This somewhat explains why there are disappointing expectations regarding Google. Google is not an indicator of danger for the wider ecosystem.