Google's Q3 Miss Raises AI Spending Concerns

Google reported Q3 2026 earnings on October 29, missing expectations across search advertising, cloud revenue, and profit, intensifying concerns about AI disrupting its core business. Search ad growth slowed to 12% quarter-over-quarter, while cloud revenue grew 103% but fell short of higher forecasts due to model delays and TPU shipment issues. Operating margins declined 2 percentage points amid heavy AI spending, with free cash flow negative at $9.1 billion. Capital expenditures reached $51.4 billion, doubling year-over-year, with 2027 spending expected to grow significantly. Google is relying on financing and partnerships, including with Anthropic, to cover near-term gaps, though analysts warn of risks if advertising weakens further.