Alphabet, the parent company of Google, on Wednesday showed the benefits and downsides that the artificial intelligence boom has wrought on its business.
The Silicon Valley company reported that revenue for the three months that ended Sept. 30 rose 25 percent from a year earlier, to $127.6 billion. The growth was driven partly by Google’s cloud business, which leases computing power to other A.I. firms and generated $30.7 billion in revenue, up a whopping 103 percent from a year ago.
But revenue fell slightly short of Wall Street estimates, even as Google’s spending on A.I. has driven up its costs. The company’s free cash flow — the cash left after paying for expenses and investments — fell to negative $9 billion. And profit was $26.1 billion, down 25 percent from a year ago, in part because of changes to the value of its investments in SpaceX and other companies.
Sundar Pichai, Alphabet’s chief executive, said in a statement that Google was making progress in A.I. “We’re excited by the range of big opportunities ahead of us,” he said.
Google’s shares fell more than 9 percent in after-hours trading.
The financial results add to the tea-leaf reading over Silicon Valley’s artificial intelligence boom, which has entered a tricky moment. Tech giants like Meta continue to spend enormous amounts to build data centers to power the technology, to the point that cash flows are going negative and the companies are selling stock and raising debt for more financing. And Anthropic, a leading A.I. lab, is seeking to go public in what could be the largest-ever initial public offering.
Yet investors are questioning whether there will be enough demand for A.I. from consumers and businesses to vindicate the spending. Some investors recently sold off bonds for the A.I. computing providers CoreWeave and Oracle amid that uncertainty.
Google is a beneficiary and driver of the A.I. boom, but it is also contending with the technology’s disruptive power. Demand for its cloud computing has soared, and Google is using A.I. to improve its online advertising business.
At the same time, the company is retooling longtime businesses, like online search, for the A.I. era. Investors have fretted that chatbots from rivals like OpenAI and Anthropic could eat away at search, as users pose questions to chatbots instead of taking their queries to Google.
The company faces continued pressure to remain competitive in the A.I. race. Google’s technology had lagged behind OpenAI and Anthropic in recent months. But last month, it introduced a new A.I. model, Gemini 4 Argon, which scored competitively on benchmarks meant to measure the abilities of A.I. On Wednesday, it released a new version of the model, Gemini 4 Carbon.
Meta and OpenAI recently introduced A.I.-powered personal assistants, which can autonomously complete tasks like booking restaurant reservations or planning workouts. Google has added agents to its enterprise products but does not offer a free consumer version like Meta’s Muse.
(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied those claims.)
Google avoided a breakup of its online advertising business in September, when a federal judge ruled that the company needed to make changes to address its advertising technology monopoly but did not need to sell off parts of the company. The Justice Department had argued that Google had to break up that business to check its power.
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