AI Growth Failed to Shield Alphabet and Intel From October Selloff

Alphabet and Intel posted strong growth in AI-related businesses as technology stocks sold off late in October, putting attention on the cash demands and business mix behind that expansion. The Philadelphia Semiconductor Index fell about 7.2% on Oct. 30. The results add earnings detail to earlier pressure on Meta, Alphabet and Intel shares.

Alphabet's third-quarter revenue increased 25% to $127.58 billion. Google Cloud revenue more than doubled, rising 103% to $30.71 billion, while its operating income grew to $11.12 billion from $3.59 billion a year earlier. The cloud unit's growth translated into higher operating income, but it was not the only part of Alphabet's results investors had to weigh.

Google Search revenue rose 12% to $63.35 billion, below analysts' estimate of about $64.96 billion. Alphabet said lower ad monetization in AI Mode weighed on Search growth. The results point to a difference between growing use of AI-powered services and the revenue those services currently generate from advertising.

Alphabet spent $51.36 billion on capital expenditures during the quarter, more than the $42.29 billion it generated in operating cash flow. Free cash flow, the cash left after capital spending, was negative $9.07 billion. Inventory reached $13.31 billion at the end of September, up from $2.44 billion at the end of 2025.

Alphabet said unsold Tensor Processing Unit (TPU) systems tied up some cash, while the inventory increase also reflected other items. Selling complete systems requires the company to build inventory before delivery, adding to its working-capital needs. That leaves Alphabet with a different cash profile from cloud services that generate revenue as customers use computing capacity.

Intel's third-quarter data-center and AI revenue rose 78% to $7.32 billion, and total revenue increased 21% to $16.51 billion. Server chip average selling prices climbed 54%, while volume grew about 10%. A shift toward higher-end products accounted for most of the price increase, so the revenue gain reflected product mix as well as demand.

Intel forecast fourth-quarter revenue of $15 billion to $16 billion, below analysts' estimate of about $17.07 billion. Data-center customers continued to demand products, but shortages of advanced packaging substrates, memory and other components limited Intel's ability to fill orders. Its Client Computing and Physical AI revenue fell 5%, and traditional PC chip volume declined about 14%.

Intel Foundry generated $6.70 billion in third-quarter revenue, with about 94% coming from transactions within Intel. External revenue was $411 million, and the division recorded an operating loss of $1.85 billion. The figures show that internal business made up most of foundry revenue while sales to outside customers remained a small share.

Other large technology companies reported different cash-flow outcomes, measured over different periods. Microsoft generated $18.6 billion in free cash flow for its latest quarter after $58 billion in operating cash flow and $39.4 billion in cash capital spending. Amazon's trailing 12-month free cash flow shifted from a $14.8 billion inflow to a $42.4 billion outflow, primarily as purchases of property and equipment increased.

Meta posted negative third-quarter free cash flow of $2.12 billion and forecast 2026 capital expenditures of $135 billion to $145 billion. S&P Global changed Meta's credit-rating outlook from stable to negative on Oct. 30, citing uncertainty around spending and cash flow; it did not lower the rating. Taken together, the results leave the market weighing how much cash each company can retain after funding the equipment, inventory and expansion behind its AI growth.