Google parent Alphabet lost just over $500 billion in stock market value on Thursday. The drop came after the company shared its latest quarterly results.
The stock fell almost 13% in one day and hit a six-month low. Alphabet’s total market value slid to $3.46 trillion from $3.97 trillion the day before.
Investors reacted to news that Google’s AI summaries on search were cutting into ad sales. Amazon and Microsoft also reported results this week, and both saw their shares fall.
Google’s AI Search Weighs on Ad Revenue
On the surface, Alphabet’s numbers looked solid. Total revenue grew 25% from a year earlier to $127.6 billion.
Google Cloud led the gains. Its revenue jumped 103% to almost $31 billion.
Profits told a different story. They fell 25% during the quarter.
Alphabet also reported negative free cash flow of more than $9 billion. This is only the second time that has happened since the company went public, and the loss is almost twice the figure from three months ago.
Free cash flow is the money a company keeps after paying for operations and investments. A negative number means Alphabet is spending more than it brings in, mostly on AI.
Google Search now shows AI summaries by default when people look something up. That change reduced the number of ads the company could sell. Ads shown next to search results make up most of Alphabet’s business.
Tracy Woo, a principal analyst at Forrester, said the results highlight “the challenge of funding massive AI investments while maintaining the strength of established businesses.”
Google chief business officer Philipp Schindler said he felt “very good about our trajectory” with the AI-focused search engine.
Amazon and Microsoft Shares Also Slip
Amazon shares fell 6% in after-hours trading on Thursday. Quarterly sales rose 11% to $201 billion.
The company also reported negative cash flow of $42 billion. That figure grew six-fold in three months.
Chief executive Andy Jassy said Amazon has a chance to build two businesses that could each bring in $1 trillion. He did not name them, but during a call with analysts he often pointed to Amazon’s own computer chips and its AI platform Bedrock.
“We can fund this plan, and I think it will forever change the size, the revenue, the free cash flow of Amazon,” Jassy said.
Microsoft shares fell less than 1% on Thursday. Revenue grew 19% to $92.3 billion, and its cloud business grew 30% to $63 billion.
The company spent about $5 billion less on AI investments in the quarter. Earlier this week, it also announced plans to cut thousands of jobs.
Chief executive Satya Nadella said daily Copilot users grew 500% from a year ago. Woo said Microsoft’s results show strong business demand for AI but raise the question of “where AI value will ultimately be captured.”
Alphabet’s Thursday decline was its second-worst single-day showing this year.
