$GOOGL · Schwab Network · 2026-10-29

earnings appear to be dominating the movement of E-minis, with Google's Alphabet stock falling sharply.

What happened with Alphabet? Google's stock fell by 10%. Double failure, and cash flow. I think people were a little surprised, weren't they?

Yes. It turns out that this is the biggest shock story of the past twelve hours, and it is the double failure of Google's Alphabet. Earnings, $2.12 per share, were lower than estimates that had pointed to more than $3 or around $3. So, a major failure in terms of profits.

Revenues, 127.6 million, are up about 25% from last year, but lower than estimates. Operating income, 40.6 billion, an increase of 30%. Here was some good news at Google Alphabet, which was that cloud growth was amazing.

But, Nicole, this is the bigger problem, and this is what they are worried about. Free cash flow, negative $9.1 billion, and it appears from all angles that artificial intelligence is eating away at their research activity, and all this money they are spending is transferring numbers from research to artificial intelligence.

Some concerns about what artificial intelligence will do to Google search suggest that their search engine, the main source of their dominant position in the industry, appears to be weakening or slowing down and that artificial intelligence is affecting it.

I think this is why the stock has fallen so much. Many, as you know, the failure is significant, the revenue figures were large, but there is a slight failure, and I think the problems caused by AI for the search engine mean some real uncertainty for Google in the future, Nicole.

Yes, I mean I thought it was very interesting. It is kind of what we were waiting to hear from them a quarter or two ago regarding the research.

I mean, it was always said on Wall Street that Google search would suffer a bit when artificial intelligence came along, but in reality, we have Google, you go to search for something and you get a response from Google's artificial intelligence.

So, I'm surprised to see that actually because I know everyone is still using it. I see people using it. I use it. But Google's search function is the weakest part.

The cloud performed well. Also, future capital expenditures, I think that's something interesting. They expect increased capital spending in the new year, and this shows greater confidence in the development of artificial intelligence, doesn't it?

Absolutely right. I mean, but here lies some doubt that makes the stock perform very poorly. If they have to spend all this capital expenditure just to maintain what they already have, isn't that right?

This is not the kind of revenue-generating activity that other companies do.

So, Google and Alphabet are a little more worrying than we thought before their earnings were released, but yes, spending a lot of money and perhaps not getting the returns they were looking for, and at the same time artificial intelligence is causing problems for their dominant position in search, Nicole.

So, yes, there is a little uncertainty here with Google Alphabet and the stock market shows that this morning.