ALPHABET'S $127.6 BILLION QUARTER STILL WASN'T ENOUGH — SHARES FELL 13%

Alphabet's earnings missed expectations. Revenue rose 25% year over year to $127.6 billion in the third quarter, while net income fell 25% to $26.2 billion — far lower than the $37.3 billion expected.

Net income was affected in part by the company's investments, including an $8.7 billion net loss on its equity investment in SpaceX, according to a weekly market wrap of the results.

The key weakness came from the search advertising business, where revenue rose 12% year over year to $63.4 billion, missing the $64.9 billion estimate and slowing from the 20% year-over-year growth seen earlier in the year.

The cloud business was the bright spot, doubling sales to $30.7 billion on a boom in demand for AI services and computing capacity. But cash flow fell further, coming in at a loss of $9.1 billion, while AI spending increased in the quarter to $51.3 billion, up from $44.9 billion in the second quarter.

Shares fell 13% in after-hours trading after the report, as investors weighed whether even the world's biggest search business can spend its way through the AI transition without hurting the bottom line.