Alphabet Reports Third-Quarter Earnings Wednesday as Investors Weigh AI Spending Against Growth

Alphabet is scheduled to release its third-quarter results after the market closes on Wednesday, with investors watching closely for signs that its heavy spending on artificial intelligence is paying off.

According to a consensus of estimates compiled by LSEG, analysts expect earnings per share of $3.02 on revenue of $128.2 billion. That would represent a 25% increase from a year earlier and the fastest pace of growth for any period since 2021.

The report comes at a nervous time on Wall Street, where concern is rising over the costs of building out AI infrastructure. Shares of the Google parent fell in five of the last six sessions through Tuesday and are down roughly 7% in October.

In July, Alphabet raised its full-year capital expenditure forecast to between $195 billion and $205 billion, up from earlier guidance of as much as $190 billion. The company also posted negative free cash flow for the first time in that report.

For the third quarter, FactSet data shows analysts expect capital spending to climb 130% from a year earlier to $55.2 billion. Annual capex is projected to top $200 billion and then exceed $300 billion in 2027. Analysts also forecast negative free cash flow of $2.27 billion for the quarter, with the shortfall expected to widen in each of the following four quarters.

The spending is being matched by strength in Google's cloud division, which houses its AI products. Cloud revenue is projected to grow 90% to $28.7 billion as Google takes market share from larger rivals Amazon Web Services and Microsoft Azure. Microsoft reports earnings on Wednesday as well, and Amazon follows on Thursday.

Google is rapidly bringing its Gemini models and services into its enterprise offerings and is increasing sales of its custom tensor processing units, which compete with Nvidia's graphics processing units. Meanwhile, its core business faces pressure from OpenAI and Anthropic, as well as a surge of new AI agents entering the market.

"Google continues to be well-positioned across AI," analysts at Citizens, who recommend buying the stock, wrote in a report last week. "That said, execution risk exists, and we are incrementally cautious on Search as we believe competition is increasing with agents and requires another pivot."

Company executives will discuss the results with analysts on a conference call scheduled for 4:30 p.m. ET.