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Alphabet shares fell 13% on Thursday, erasing roughly $500 billion of market value in the stock's worst day on record. The owner of Google burned through cash last quarter and said searches in its AI Mode were threatening profits at its core advertising business. The report landed as investors grow increasingly wary of whether the AI investment boom will pay off.
The drop is the second-biggest in Wall Street history, behind Nvidia's $593 billion rout in January 2025. The headline figure is approximate: at 1:30 p.m. EDT, with shares down around 12%, the loss stood at $480 billion and Alphabet's market value at $3.46 trillion. The Nasdaq fell 1.4%. Alphabet's results, along with downbeat reports from Amazon and Intel on Thursday afternoon, sent traders into Treasuries, and the 10-year yield dropped 0.1 percentage point to 4.93%.
What Changed
- Alphabet shares fell 13% on Thursday, erasing roughly $500 billion of market value in the stock's worst day on record.
- Cash flow reached minus $9.1 billion in the three months to the end of September, as capex grew to $51.3 billion.
- Google Search revenue grew 12% year over year in the third quarter, down from 17% in the second quarter and 19% in the first.
- Microsoft's capex rose to $45.2 billion, and it still reported free cash flow of $18.6 billion.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
Cash flow sinks further
Alphabet's cash flow fell deeper into negative territory, reaching minus $9.1 billion in the three months to the end of September. It was only the second quarter of negative cash flow since Google went public in 2004.
Capital spending on AI caused the shift. Capex grew to $51.3 billion in the quarter, up from $44.9 billion in the second quarter. For all of 2025, capital expenditure was $91.4 billion. Chief financial officer Anat Ashkenazi reiterated that capex would reach as much as $205 billion this year, implying fourth-quarter spending as high as $73.1 billion.
Google also disclosed future commitments for data center purchases, leases, equipment, energy and other obligations in excess of $1 trillion. To back the spending, Alphabet has taken on tens of billions in debt. In June it announced plans to raise about $85 billion in its first share sale in more than two decades.
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Ashkenazi also pointed to a $5.2 billion cash payment to settle a 2018 European regulatory fine, which contributed to the more deeply negative cash flow.
Search growth slows
Google Search revenue grew 12% year over year in the third quarter, down from 17% growth in the second quarter and 19% in the first. Revenue in Google's largest division came to $63.4 billion, missing estimates of $64.9 billion.
Philipp Schindler, Google's chief business officer, said AI Mode queries, which give conversational answers rather than a list of links, were eating into traditional search and led to "lower monetisation" via ads. That held even as overall queries grew at their fastest rate in five years. The company is bringing more ads to AI Mode responses and beginning to roll them out globally.
Schindler attributed some of the ad slowdown to changing foreign exchange rates, reduced revenue from Asian retailers due to EU regulatory changes, and World Cup ad spending pulled into the first half of the year.
"One of the companies most aggressively investing in AI to protect its core businesses showed vulnerability to AI," said Mike O'Rourke, chief market strategist at JonesTrading. "That's why people are disappointed."
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Microsoft's cash cushion
Microsoft received a warmer reception. Its capex rose to $45.2 billion, and it still reported free cash flow of $18.6 billion. Its shares ended the day down 0.2%.
"Markets are carefully calibrating the trade-off between capex and free cash flow," said Dec Mullarkey, managing director at SLC Management. "Microsoft is a standout on cash discipline, while delivering on growth. Google fell short and cash flow is expected to be a drag through next year."
Alphabet's cloud unit was the bright spot. Google Cloud revenue grew 103% over the year to $30.7 billion, beating analysts' $29.2 billion prediction. The unit benefited from demand for its AI services and from selling computing capacity to rivals such as Anthropic. Alphabet's quarterly filing showed that upward of a third of that growth stems from a joint venture Alphabet partially owns.
NewStreet Research said Alphabet will face ongoing headwinds until it can improve "faith in search fundamentals and AI monetization." The firm estimates that could take until the first half of 2027.
Frequently Asked Questions
How much market value did Alphabet lose?
Roughly $500 billion on Thursday, when shares fell 13% in the stock's worst day on record. At 1:30 p.m. EDT the loss stood at $480 billion. The drop is the second-biggest in Wall Street history, behind Nvidia's $593 billion rout in January 2025.
Why did Alphabet's cash flow turn negative?
Capital spending on AI caused the shift. Capex grew to $51.3 billion in the quarter, up from $44.9 billion in the second quarter, and cash flow reached minus $9.1 billion. A $5.2 billion cash payment to settle a 2018 European regulatory fine also contributed.
How much does Alphabet plan to spend this year?
Chief financial officer Anat Ashkenazi reiterated that capex would reach as much as $205 billion this year, implying fourth-quarter spending as high as $73.1 billion. Capital expenditure for all of 2025 was $91.4 billion.
What is happening to Google's search business?
Search revenue grew 12% year over year in the third quarter, down from 17% in the second quarter. Chief business officer Philipp Schindler said AI Mode queries were eating into traditional search and led to lower monetisation via ads.
How did Microsoft compare?
Microsoft received a warmer reception. Its capex rose to $45.2 billion, and it still reported free cash flow of $18.6 billion. Its shares ended the day down 0.2%.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
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Marcus Schuler
Editor-in-Chief and founder of Implicator.ai. Former ARD correspondent and senior broadcast journalist with 10+ years covering tech. Writes daily briefings on policy and market developments. Based in San Francisco. E-mail: editor@implicator.ai
