Alphabet Stock Plunges 13% in Worst Day Since IPO, Erasing Nearly $500 Billion as AI Spending Sinks Cash Flow
The Google parent reported slower search growth, a sharp earnings miss and $51.4 billion in quarterly capital expenditure, while Google Cloud delivered stronger results.
Alphabet shares tumbled about 13% on Thursday, on pace for the worst day in the Google parent's history. Investors reacted to a third-quarter report that showed slowing search growth, a sharp profit miss and free cash flow pushed deep into the red by massive spending on artificial intelligence.
The selloff was on track to erase about $496 billion in market value, according to Yahoo Finance estimates. That would be the second-largest one-day loss for any U.S.-listed company, behind only Nvidia's roughly $593 billion drop on Jan. 27, 2025.
It would also be Alphabet's steepest decline since its 2004 initial public offering. The company's previous worst day by market value came on July 23, 2026, when it lost about $275 billion.
Worst post-earnings drop on record
Bespoke Investment Group said the move was Alphabet's steepest post-earnings decline since it went public. The previous record was a slide of nearly 10% in July 2008.
The stock has now lost about $1.4 trillion in value since its record high in May, Yahoo Finance reported.
To match Nvidia's record, Alphabet shares would need to close near $274.75, about 15% below Wednesday's close, according to Yahoo Finance calculations.
Profit miss
Alphabet reported third-quarter revenue of $127.6 billion, up 25% from a year earlier and slightly ahead of analysts' expectations. It was the company's 13th straight quarter of double-digit revenue growth.
Earnings were the problem. Alphabet earned $2.12 a share, down from $2.87 a year earlier and well below the analyst consensus of $3.02, according to Investing.com.
The shortfall was driven by an $8.2 billion hit in other income and expenses, mainly from an unrealized loss on Alphabet's investment in SpaceX. Fortune reported that losses on equity investments cut earnings by 55 cents a share.
Search slows
Revenue from search and other advertising, Alphabet's biggest business, rose 12% to $63.3 billion. Wall Street had expected about $65 billion, Yahoo Finance reported.
YouTube advertising revenue grew 9% to $11.2 billion.
"The bears will argue this is the first quarter that AI is starting to seriously hurt their search business," said Jeffrey Wlodarczak, chief executive of Pivotal Research.
Alphabet executives disputed that view. Chief Executive Sundar Pichai said on the earnings call that "our year-over-year query growth rate is the highest it's been in the last five years."
Chief Business Officer Philipp Schindler said the search slowdown was mainly due to foreign exchange effects and retail and media factors, according to a summary of the call.
Cash flow turns negative
The biggest concern for many investors was cash.
Alphabet reported negative free cash flow of $9.1 billion for the quarter, worse than negative $5.9 billion in the second quarter. Capital expenditures more than doubled from a year earlier to $51.4 billion as the company poured money into data centers and AI chips.
Alphabet kept its 2026 capital spending forecast unchanged at $195 billion to $205 billion. It warned that spending will rise sharply next year.
"We continue to expect our CapEx to increase significantly in 2027," Chief Financial Officer Anat Ashkenazi said.
The company did not give a dollar figure for next year and said details would come with its fourth-quarter results.
Key third-quarter figures:
- Revenue: $127.6 billion, up 25%
- Earnings per share: $2.12 vs. $3.02 expected
- Search revenue: $63.3 billion, up 12%
- Google Cloud revenue: $30.7 billion, up 103%
- Capital expenditures: $51.4 billion
- Free cash flow: negative $9.1 billion
Cloud a bright spot
Google Cloud was the strongest part of the report. Cloud revenue more than doubled to $30.7 billion, and operating income more than tripled to $11.1 billion.
The unit's operating margin widened to 36.2% from 23.7% a year earlier. Its backlog of contracted revenue reached $561 billion, with just over 55% expected to be recognized within 24 months.
The company also said its Gemini AI app has passed 1 billion users.
"Q3 was a strong quarter for Alphabet," Pichai said.
Analysts split
Some analysts saw the selloff as overdone.
Angelo Zino of CFRA said the pullback "probably represents a buying opportunity."
Others said the results raise harder questions about whether Alphabet's huge AI investments will pay off before they hurt its core advertising business. Alphabet raised $84.8 billion in equity in June, including $10 billion from Berkshire Hathaway, to help fund its spending, according to Fortune.
Big Tech spending under scrutiny
The drop comes as investors scrutinize the AI spending plans of the largest technology companies. Hyperscalers are expected to spend about $2 trillion on AI over two years, Fortune reported.
Alphabet's results stood in contrast to Microsoft, whose shares rose after it reported strong cloud growth and cash flow on Wednesday.
Investors will next look to Amazon, which reports after Thursday's close. Yahoo Finance noted that strong growth at Amazon Web Services without a similar cash-flow hit would suggest Alphabet's problems are specific to its search business rather than the AI buildout as a whole.
Volatile year for megacaps
Thursday's plunge adds to a year of extreme swings in the largest stocks. U.S.-listed companies shed $200 billion or more in a single session 18 times in 2026 through Wednesday, up from 13 times in 2025, according to Yahoo Finance. Before 2022, that had never happened.
Alphabet still holds about $265 billion in cash and marketable securities. It also maintained its quarterly dividend of 22 cents a share.
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