Alphabet is expected to report earnings per share of $3.02 and revenue of $128.2 billion for the third quarter, marking a 25% increase year-over-year, the fastest growth since 2021. However, this report comes at a time of heightened anxiety on Wall Street regarding the financial implications of the company's aggressive investments in artificial intelligence.
Shares of Alphabet have declined approximately 7% in October, with five out of the last six trading sessions ending in losses. The company has raised its full-year capital expenditure forecast to between $195 billion and $205 billion, reflecting a 130% increase in capex to $55.2 billion for the third quarter, according to FactSet.
Analysts predict that Alphabet will experience negative free cash flow of $2.27 billion in this quarter, with expectations of worsening cash flow over the next year. Despite these challenges, Alphabet's cloud division is projected to grow by 90% to $28.7 billion, as it gains market share from competitors like Amazon Web Services and Microsoft Azure.
Analysts from Citizens have expressed a cautious outlook on Alphabet's core business due to increasing competition from AI agents, while still recommending the stock as a buy. The company's executives will discuss these results in a conference call scheduled for 4:30 p.m. ET