Alphabet stock has been in a strong sell-off this month as concerns about the artificial intelligence industry continues. GOOG’s sell-off accelerated in the extended hours after the company published its quarterly earnings, which showed that its business was facing substantial challenges, raising concerns about the AI industry.
Alphabet Stock is Tumbling Amid AI Jitters
There are several reasons why GOOG stock is tumbling after publishing its financial results. First, the results came short of expectations, with the earnings-per-share (EPS) came in at $2.12, much lower than the expected $3.02, a 29.8% miss. In line with this, its advertising and search revenues were weaker than expected.
Second, the company revealed that its capital expenditures will be higher in 2027 than this year. Google is spending over $200 billion in capital expenditures this year, meaning that the spending will be higher than that next year.
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There are three main risks in this spending. First, it is having an impact on its free cash flow (FCF), which has turned negative. Second, it may push the company to sell shares to raise cash next year. It has already raised over $87 billion this year, and this trend will continue. It also raised $4.3 billion in Q3 through its ATM program. Third, the company is struggling to show the results of its AI investments on its business.
Further, the company provided a weak guidance, with management flagging AI search monetization issues. Monetizing AI has become more challenging than its traditional search business. Also, this search is now facing more competition from the likes of Claude and ChatGPT.
On the positive side, despite the challenges it is facing, Google is still making substantial sums of money. The average estimate is that its annual revenue will be $500 billion, up by 24% from a year earlier. It will then make $627 billion, up by 25% from a year earlier.
Google Stock Price Technical Analysis
Alphabet stock chart | Source: TradingView
The daily chart shows that the GOOG stock has been in a steady downward trend after peaking at $404 in May this year. It bottomed out at $314 before this week’s earnings. This was a big move since it coincided with the lowest swing in July this year.
The stock has now gapped lower, moving to a low of $288. It has moved below the 78.2% Fibonacci Retracement level, confirming the bearish outlook. Therefore, the stock will likely attempt to rebound after earnings and then resume the downward trend as risks rise.
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The post Alphabet Stock Has Gapped Lower After Earnings: Here’s Why and What’s Next appeared first in UK on InvestingCube .
