This week, as AI companies kept reporting earnings, the market cared less about AI revenue growth and more about whether the huge investment is actually coming back as profit and cash.
As a result, Alphabet's stock plunged 12.64% in a single day even though revenue grew 25% and Google Cloud grew 103%. Intel beat expectations on Q3 adjusted EPS, but once it gave its Q4 outlook, the after-hours price crashed 23%.
Microsoft showed strong cloud growth and cash flow, and Samsung Electronics set a record with 107 trillion won in quarterly operating profit, yet still couldn't beat the market's mood and fell.
Intel Crashes After Its Q4 Outlook
Intel's Q3 revenue was $16.513 billion, up 21% from a year earlier, and non-GAAP adjusted EPS was $0.52. EPS beat the market's $0.41 estimate, but revenue came in a little under the $16.56 billion estimate.
Data center and AI segment revenue was $7.3 billion, up 78%. Meanwhile, revenue in the client computing and physical AI segment, which covers PC processors, was $8.1 billion, down 5%.
Demand for AI server CPUs is strong, but the PC market split off in the other direction: revenue fell on higher memory prices and corporate IT budget pressure.
✦ Intel Stock Fell Apart on Its Q4 Outlook
Oct 8-29 Nasdaq regular-session closes, plus the Oct 30 pre-market price
Up to here, it had been holding on. But when Intel announced its Q4 outlook, the stock completely fell apart. Intel guided to revenue of $15.0 billion to $16.0 billion and adjusted EPS of $0.25.
The $15.5 billion revenue midpoint is about 9% below the market's $17.07 billion estimate, and the EPS outlook is about 42% below the $0.43 estimate. The worry that profit could drop sharply next quarter, compared with Q3, came true exactly as feared.
Supply problems piled on too. An explosion at the Kiryat Gat plant in Israel stopped the production facility for about two weeks, and a revenue hit of about $600 million is expected over the next two quarters.
On top of that, Intel plans to spend about $20 billion on capital expenditure in 2026 and even more in 2027. As Intel's CFO said, in 2027, when the process transition overlaps with 14A preparation, it's realistically hard for free cash flow to turn positive.
On October 29, Intel closed down 3.62% at $92.07 in the regular session. When the results came out after the close, the stock fell as low as $70.87 in after-hours trading, a drop of about 23%, and investors had a terrifying day.
Alphabet: Cloud Did Great, but Search and Cash Flow Held It Back
Alphabet's Q3 revenue was $127.577 billion, up 25% from a year earlier, but a little short of the market's $128.2 billion estimate.
Google Cloud revenue, however, jumped 103% to $30.709 billion, and operating income grew a lot too, to $11.121 billion from $3.594 billion a year earlier. Cloud was growing not just revenue but profit, fast.
✦ Alphabet Stock Dropped 12.64% in One Day
Oct 9-29, Nasdaq regular-session closes
The problem was search advertising, Alphabet's biggest cash cow. Search and other revenue grew 12% to $63.35 billion, but the growth rate slowed from 17% in the previous quarter. Total advertising revenue, $82.012 billion, also missed market expectations.
People say generative AI search is drawing in users, but that's why worries are growing that it doesn't earn as much as the old search ads did.
Lately Google has also seemed to keep losing ground in the AI race. If it can't even earn properly from search ads, it's fair to ask, 'Does Google even have a future?'
Alphabet's adjusted EPS of $2.67 also came in under the market's $3.02 estimate. GAAP EPS was $2.12, and net income was $26.17 billion, down 25% from a year earlier.
Other income and expense included an unrealized valuation loss of about $8.2 billion on its SpaceX stake. (So they got stuck with SpaceX too...)
On the other hand, operating income grew 30% to $40.576 billion, which was at least some relief. Operating profit from the core business grew, but the valuation loss on investments dragged down the final net income.
Cash flow wasn't good either. Quarterly capital expenditure was $51.4 billion, and operating cash flow was $42.3 billion. In other words, take the capex out of the cash earned from operations and you're $9.1 billion in the red.
On top of that, Google kept its 2026 capex outlook at $195 billion to $205 billion and said it will rise well above that in 2027. Cloud is making big profits, though.
Search ad growth is slowing, and the data center investment burden is huge... That's why investors are nervous.
Alphabet's stock closed down 12.64% at $283.82 on October 29. It was the biggest one-day drop in roughly the past 20 years. Alphabet falling more than 10% in a single day...? That's shocking.
Of course, compared with Intel, which fell more than 20%, it got off easy.
Microsoft: Revenue, Cloud and Cash Flow All Grew
Microsoft's fiscal 2027 Q1 revenue was $92.279 billion, up 19%, and operating income grew 21% to $45.915 billion. Non-GAAP adjusted EPS was $4.89, above the market's $4.72 estimate.
Cloud revenue grew 30% to $63.9 billion, and Azure growth was 48%.
✦ Microsoft Stock Stayed Put After Earnings
Oct 8-29, Nasdaq regular-session closes
The backlog, which gives a sense of future revenue, grew too. Commercial remaining performance obligations (RPO) were $677 billion, up 73%. About 30% of that is expected to be recognized as revenue over the next 12 months.
One thing was a little off-putting: new contract value this quarter fell 12% from a year earlier. And since one large contract contributed a lot to the results, we can't be unconditionally optimistic about the outlook.
✦ Cash Flow Contrast: Alphabet vs. Microsoft
What was left after paying for investment
Microsoft's strength was the cash-generating power to carry its investment costs. Operating cash flow was $58 billion and free cash flow was $18.6 billion.
Cash spending on property and equipment was $39.4 billion, and subtracting that from operating cash flow gives the $18.6 billion in free cash flow. Unlike Alphabet, it generated plenty of cash.
Next quarter's capex is expected to top $50 billion, but Microsoft sounded confident about keeping free cash flow positive across the whole of fiscal 2027.
Right after the results, the stock rose more than 4% at one point in after-hours trading, but the next day in the regular session it closed down 0.16% at $530.14.
It showed Azure's growth and its cash-generating power, but the task of proving it can earn enough to carry ever-growing investment costs remains, I guess.
Samsung Electronics: A Weak Stock Despite 107 Trillion Won in Operating Profit
Samsung Electronics' Q3 revenue was 195.25 trillion won and operating profit was 107.44 trillion won, both quarterly records. The DS Division, which handles semiconductors, posted revenue of 147.1 trillion won and operating profit of 106.5 trillion won.
In effect, nearly all of the operating profit came from chips. On the other hand, the DX Division (TV, home appliances, smartphones and more) posted an operating loss of 800 billion won.
And, sadly, net profit was 75.13 trillion won, about 13.7% below the analyst average estimate of 87.01 trillion won.
✦ Samsung Electronics Fell Two Days in a Row on Record Earnings
Oct 16-30, KRX regular-session closes
The shareholder return plan drew attention too. Samsung Electronics expects total shareholder returns of 90 trillion to 110 trillion won for 2026, and set the Q3 dividend total at 30 trillion won.
After subtracting the 35 trillion won already planned or carried out, 55 trillion to 75 trillion won remains.
The size and method of carrying out the remainder will be decided at a board meeting at the end of January 2027.
Even so, the stock fell 4.13% on October 29 to close at 232,000 won, then fell another 3.02% on the 30th to 225,000 won. Over the two days, it fell 7.02% from the October 28 close.
On the 30th, KOSPI fell 3.48% and foreign investors net sold more than 1.6 trillion won, and SK hynix slid 7.08% too. Everyone read it as a day when risk aversion after the US tech sell-off and profit-taking in chip stocks piled up together.
A Look at Analyst Price Targets
✦ Analyst Price Target Consensus
As of Oct 30
Intel's average price target in the consensus above is based on data from before this earnings report. After the report, there were changes, like Rosenblatt cutting its target from $80 to $70 and keeping its sell rating.
The consensus doesn't reflect that yet, so keep it in mind.
For Alphabet, a string of firms cut price targets the day after earnings. (These people have more information than we do, and analyzing it is their job, so what's with cutting targets the day after earnings...)
BMO cut from $480 to $425, Cantor Fitzgerald from $420 to $350, UBS from $380 to $332, and Bernstein from $385 to $325.
It's the result of recalculating earnings forecasts to reflect slowing search ads and AI investment costs.
Microsoft went the other way. TD Cowen raised its price target to $650, Bernstein to $722, and UBS to $700.
For Samsung Electronics, Yuanta Securities Korea raised its target to 690,000 won, while IBK Investment & Securities kept its buy rating but cut its target to 350,000 won, and Hana Securities put it at 480,000 won.
Even on the same results, valuations split widely depending on what you assume about future profit and memory prices.
Plenty of companies keep setting record earnings and the rally was supposed to go on, but a few of them, Intel and Alphabet among them, threw sand in it, and AI stocks collapsed... I wonder what will happen next week.
This isn't investment advice. You know that, right? Let's each protect our own hard-earned money.
That's all for this post. See you next time.
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🌐 Korean version: 인텔, 알파벳 등 AI 관련주 폭락... 주요 AI기업 실적발표 결과 및 이슈 총정리
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