Must read: easyJet rebounds as Alphabet’s spending plans hit shares

easyJet

easyJet (LSE:EZJ) reported third-quarter profit of £85 million, sliding from £286 million in the same period last year, as the airline deals with the fallout from the Middle East conflict, namely higher fuel costs, disrupted travel and weak demand. However, easyJet said attractive pricing has helped support strong late booking demand for flights and holidays.

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easyJet’s holidays arm has been the recent star of the show. It reported quarterly profit before tax of £84 million, only modestly lower from £86 million year-on-year, highlighting the resilience of this part of the business in the face of challenging macro headwinds. This growing business has come at the right time for easyJet, helping it catch the eye of cost-conscious consumers searching for value packages. And its capital-light model appears to be playing out well for the group. easyJet has high hopes for the unit’s longer-term contribution to overall profits.

Shares are bouncing back today after yesterday’s 12% slide. Overshadowing these earnings is this year’s bidding war between Castlelake and Apollo, with the latter firmly in the pilot’s seat. The stock was punished heavily on Wednesday plunging as much as 15% at one stage amid concerns that Apollo’s currently winning £5.7 billion takeover offer could be threatened or delayed after the European Union said it is reviewing ownership rules to stop foreign investors taking control of airlines in the bloc. There are concerns that a US private equity takeover of easyJet could pave the way for further deep-pocketed US private equity firms to swoop in on European airline companies, relinquishing EU ownership and control in the sector.

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However, shares are still trading sharply higher this year, reflecting the takeover premium, suggesting investors still believe a deal will ultimately go through.

Alphabet

Shares in Alphabet Inc Class A (NASDAQ:GOOGL) fell after-hours reflecting concerns about its heavy levels of AI spending. It now expects full-year capex of $195 billion (£146 billion) to $205 billion, up from its previous guidance for between $180 billion and $190 billion. Google’s parent company also reported its first negative free cash flow figure ever, reflecting the intensity of its spending, while adjusted earnings per share hit $2.85, missing analysts’ expectations for $2.89. There’s little room for error in the extremely competitive, fast-developing AI arms race – Google’s recent delay of its next AI model Gemini 3.5 Pro has caused some concern for investors as rivals OpenAI and Anthropic continue to make dominant strides.  

On a more positive note, second-quarter Google Cloud revenue soared 82% to $24.8 billion, ahead of forecasts, while total revenue hit $119.80 billion also beating analysts’ expectations.

Despite this week’s weakness, shares in Alphabet have performed well lately, gaining almost 80% year-on-year, and close to 10% year to date, outperforming some of the other hyperscalers, particularly Microsoft Corp (NASDAQ:MSFT), which suffered a brutal slide in June.

Alphabet’s shares are in the red in Frankfurt this morning and the company has suffered a series of price target downgrades from the analyst community today including from JP Morgan and Morgan Stanley.