Alphabet’s share price pulled back sharply from its peak of more than US$400 in May 2026 to around US$280, wiping out close to one-third of its market capitalisation.
The catalyst?
Earnings per share (EPS) missed in the third quarter of 2026 (3Q2026), coming in at US$2.12 against consensus analyst estimates of US$3.02.
As Alphabet owns a stake in the publicly listed SpaceX, a fall in the share price of the latter caused a non-operating accounting loss of US$8.7 billion for the quarter, which weighed on the bottom line.
Furthermore, Alphabet’s heavy capital outlays spooked investors, as it announced 3Q2026 quarterly capex of US$51.4 billion, pushing its free cash flow (FCF) to negative US$9.1 billion.
Although Alphabet’s 2026 capex is expected to stay within the guided range of US$195 billion to US$205 billion, capex spending in 2027 is projected to increase significantly, fuelling investors’ concerns.
However, Alphabet’s operating engines remain strong.
Its 3Q2026 revenue surged 25% year on year (YoY) to US$127.6 billion, driven by Google Cloud, which climbed 103% to US$30.7 billion.
Meanwhile, operating income increased 30% YoY to US$40.58 billion, with the operating margin improving from 31% to 32%, demonstrating improving operating leverage.
Right now, the market is offering Alphabet’s shares at a price-to-earnings (P/E) ratio of 13x – a significant discount relative to its Magnificent Seven peers, which trade at a median P/E of 31.6x.
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