Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Google's parent company, were trading down over 10% on Oct. 29, the day after its third-quarter report. It appears decelerating growth in search revenue and heavy spending on artificial intelligence (AI) are the two main factors to blame. Capital spending on data centers and equipment topped $51 billion in the quarter, pushing free cash flow to negative $9 billion. But that spending is funding the one reason to buy the dip: Alphabet is becoming more than a search company. Revenue from Google Search now brings in less than half of total revenue, down from 55% a year ago. Revenue outside of Search grew 40% year over year to $64 billion. Google Cloud is the star of the show, with revenue more than doubling, and its operating margin climbed to 36% from 24% a year ago. Its backlog reached $561 billion, which puts the cloud business on course to potentially exceed Search revenue over time if it maintains high growth.
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