NEW YORK: Google stock fell 12.6% on Thursday, erasing more than $500bn from Alphabet’s market value after weaker-than-expected growth in search advertising and heavy AI spending unsettled investors.
Alphabet’s market value fell to $3.46 trillion from $3.97 trillion the day before, as shares closed at $283.82, a six-month low.
The selloff followed Alphabet’s third-quarter results on Wednesday, when the company reported slower growth in its core search advertising business.
Google executives acknowledged that artificial intelligence (AI) searches currently generate less advertising revenue than traditional queries.
However, the company’s total revenue rose 25% to $127.6bn from $102.3bn a year earlier. Google Cloud remained a strong performer. Its revenue climbed 103% to $30.7bn from $15.2bn.
Read More: Google Maps Nano Banana AI Integration Hinted in Latest App Code
Meanwhile, Google Search revenue rose 12% to $63.4bn from $56.6bn, missing market expectations. Alphabet’s net income declined 25% to $26.2bn from $35bn in the same quarter last year.
Chief Financial Officer Anat Ashkenazi attributed much of the profit decline to an unrealised loss on Alphabet’s investment in SpaceX.
In contrast, operating income increased 30% to $40.6bn. Alphabet also recorded negative free cash flow of $9.07bn during the quarter as spending on new infrastructure rose.
Read More: AI Stocks Slide as Tech Leaders Urge Slower Development
Capital expenditure reached $51.4bn, with much of the investment directed towards AI systems and computing facilities. Chief Executive Officer Sundar Pichai defended the company’s spending plans despite investor concerns.
Microsoft and Amazon have also outlined plans for heavy AI investment as technology firms compete to expand their computing capacity. Alphabet expects capital spending to increase significantly in 2027.
