Key Points
Eli Lilly posted third-quarter revenue of $24.4 billion, up 39%, against Wall Street's estimate of about $22.6 billion. Adjusted earnings of $7.48 a share crushed the roughly $6.26 analysts expected.
Mounjaro sales jumped 65% to $10.7 billion, and Zepbound rose 49% to $5.4 billion. Lilly raised its 2026 revenue forecast by $5.5 billion at the midpoint, to $91 billion to $92 billion.
Lilly stock hit a record high on Thursday and closed up 6.6% at $1,373.00, a market value of roughly $1.3 trillion.
On the same day, Alphabet fell 12.6%, marking its worst day since going public in 2004, and erasing roughly $500 billion in market value after a revenue miss and $9.07 billion of negative free cash flow.
The economy grew at a 3.4% annual rate in the third quarter, while PCE inflation, the Fed's preferred gauge, rose to 3.6%.
On Thursday, investors made a choice.
One of the most powerful companies in the world, Alphabet, lost roughly $500 billion of market value in a single session. The day's standout went the other way: a drugmaker from Indianapolis.
Eli Lilly jumped 6.6% to close at $1,373.00 after a quarter that beat Wall Street's revenue estimate by nearly $2 billion. Alphabet fell 12.6% after a quarter that missed by about $600 million.
The message from the market was simple. It will pay for growth it can see in cash today. It is losing patience with growth it has to take on faith.
The Weight-Loss Machine Keeps Accelerating
Lilly's revenue rose 39% to $24.4 billion. Volume, the number of prescriptions filled, rose 53%. Realized prices fell 15%, and it didn't matter. Demand overwhelmed the lower prices.
Mounjaro, its diabetes shot, brought in $10.7 billion on its own, up 65%. Sales outside the U.S. nearly doubled, rising 93%. Zepbound, the same drug sold for weight loss, added another $5.4 billion, up 49%.
Lilly now expects 2026 revenue of $91 billion to $92 billion, up from $85 billion to $87 billion just three months ago.
Its adjusted earnings forecast actually slipped, to $35 to $36 a share. That's not a business problem. Lilly took a $4.57-a-share charge for drug programs it acquired, which more than wiped out a $4.07 increase in underlying profit. Investors looked straight through it.
The Runway Is Still Long
The bear case on Lilly has always been that demand would get pulled forward and then fade. Management pushed back hard on Thursday's call.
CFO Lucas Montarce said only about 1 in 10 eligible U.S. patients, and about 2 in 100 outside the U.S., are being reached today. That points to years of growth, not a one-time surge.
The one soft spot was Foundayo, Lilly's new obesity pill. It took in $184 million, below the roughly $229 million analysts expected, according to StreetAccount. But U.S. prescriptions and new patients doubled from the second quarter, and about 4 in 10 patients starting an oral obesity drug now choose Foundayo. Lilly expects approval for Type 2 diabetes in the fourth quarter.
Merck added to the health care rally, beating estimates and raising its full-year profit forecast.
Alphabet's Worst Nightmare: A Search Slowdown
Alphabet's quarter was hardly a disaster on the surface. Revenue grew 25% to $127.6 billion, and Google Cloud more than doubled, up 103% to $30.7 billion, with a backlog of $561 billion.
But the business that pays for everything else wobbled. Search revenue grew 12%, short of expectations. Google's chief business officer blamed a bigger-than-expected slowdown in search ad growth on greater use of AI Mode, Google's chatbot-style search, where advertising is still being tested.
That's the fear investors have carried for two years: that AI chatbots would eat into the most profitable business on earth. On Thursday, the numbers gave them their first real evidence.
The cash flow made it worse. Alphabet spent $51.4 billion on property and equipment in the quarter and posted negative free cash flow of $9.07 billion, against the roughly $2.7 billion positive figure analysts had penciled in. Second-quarter free cash flow had already turned negative, for the first time since Alphabet went public. We flagged that tension last week when Google started turning down cloud revenue on purpose.
Alphabet kept its 2026 capital spending forecast at $195 billion to $205 billion, and that bill is expected to top $300 billion next year.
The AI Spending Test Gets Harder
The contrast with Microsoft was brutal. Microsoft reported 48% growth in Azure, guided even higher and spent less on capital projects than analysts expected. Its stock rose. Alphabet's cloud grew more than twice as fast, and its stock posted its biggest drop in years.
The difference is cash. Investors are drawing a hard line between companies whose AI spending is still funded comfortably by their core business and those burning through cash to keep up. It's the same line that hit Meta when it burned cash for the first time in a decade.
It also reopens the question every AI investor keeps coming back to: are we in an AI bubble? The demand is real. Google Cloud's backlog proves it. But Thursday showed that the market will no longer pay any price for it.
Overall, the Nasdaq fell 1.4% and the S&P 500 fell 0.3% on Thursday, with Alphabet among the biggest drags.
The Economy Is Hot. So Is Inflation.
The day's economic data didn't help. Third-quarter GDP grew at a 3.4% annual rate, above the 3.2% economists expected. But the PCE price index rose 0.5% in September, its biggest monthly jump since March, lifting annual inflation to 3.6%. Core inflation climbed to 3.1%.
That's a tough mix for the Federal Reserve, which held rates steady at 3.75% to 4% on Wednesday. Fed funds futures already point to a likely rate hike in December, and hotter inflation only strengthens that case.
What Lands Next
Amazon, Apple and Intel report after Thursday's close. Amazon is the biggest test. After Alphabet's selloff, investors will be watching its roughly $220 billion of planned infrastructure spending as closely as AWS growth.
Friday morning brings results from Exxon Mobil, Chevron and AbbVie, before the weekend.
For Lilly, the story is about as clean as it gets in this market: surging volume, a higher forecast and a long runway. For Alphabet, the cloud boom is real, but investors now want proof that it can pay for itself.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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