Alphabet's Q3 results to put AI spending back in the spotlight

What happened

Alphabet reports quarterly results on Wednesday, with investors watching whether its large artificial intelligence spending is producing returns. Wall Street expects earnings per share of $2.97 on revenue of $127.83 billion, up nearly 25%. Analysts also want growth in Google Cloud revenue and advertising sales.

Confirmed

Global impact / market context

Heavy AI investment pushed Alphabet into negative free cash flow in the second quarter, meaning it spent more cash than it generated. If spending keeps rising without clear returns, investors may value the shares lower, while strong cloud and ad growth could ease those concerns.

Analyst inference

An AI-linked technology selloff since early October shows growing doubt about payback on huge AI investments. Goldman Sachs expects AI infrastructure companies to drive more than half of S&P 500 earnings growth, so Alphabet's spending update could shape how investors position across the sector.

Analyst inference

What to watch

1. Alphabet's capital spending, which means money spent on long-term assets like data centers, will be a focus after negative free cash flow in the second quarter. Confirmed
2. Citizens analyst Andrew Boone expects Google to signal a significant increase in capital spending in 2027, so watch whether management confirms or softens that guidance. Proposed
3. Watch Google Cloud revenue and advertising sales growth, because weakness there would make the heavy AI spending harder to justify and could pressure the shares. Analyst inference

Evidence

• seekingalpha.com