Alphabet shares fell the most in a year on Wednesday after revenue in the company’s Google Cloud unit trailed analyst estimates.

The stock sank about close to 9% in mid-day trading to $126.51. It’s headed for its steepest drop since a 9.1% decline on Oct. 26, 2022, which followed an earnings miss.

Wednesday’s plunge came even after Alphabet beat Wall Street expectations for both revenue and earnings per share. Its cloud miss was a stark contrast to Microsoft’s earnings, which showed accelerating growth in the company’s Intelligent Cloud business. Google posted cloud revenue of $8.41 billion, compared to Street Account estimates of $8.64 billion.

“The disappointment at Google Cloud contrasted with better-than-expected Azure growth at Microsoft,” UBS analysts said.

Alphabet Chief Financial Officer Ruth Porat said on the investor call that while cloud growth “remained strong across geographies, industries and products,” the expansion rate “reflects the impact of customer optimization efforts,” a phrase that generally refers to clients reeling in their spending.

Some of those comments seemed to have spooked UBS analysts.

“The GCP commentary around optimization is disappointing given that investors were hoping cloud players to begin lapping optimizations and seeing more positive momentum,” UBS said in a separate note to investors. “MSFT also pointed to an expectation that optimization would continue through this calendar year. This is consistent with our AWS estimate cuts last week.”

KeyBanc analysts were also concerned with the results in comparison to Microsoft’s growth. “While management notes Google Cloud Platform (GCP) continues to grow faster than reported results, we believe limited disclosures are creating concerns that Google lost share to Microsoft Azure, which saw growth accelerate 1 point to +28% y/y FX neutral growth,” they said.

Jefferies analysts noted Google Cloud grew 22%, slower than the 28% growth the company posted in the second quarter. They said that while interest in generative artificial intelligence is high, “The industry’s challenge in ramping AI infrastructure may be a factor in slowing recognized revs. We expect better AI impact in ’24.”

— CNBC’s Jennifer Elias and Michael Bloom contributed to this report.

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