Alphabet Plunges 13%, Its Worst Day Since Going Public, After Profit and Cash-Flow Miss

Alphabet, the parent company of Google, lost about 13% of its stock value in a single day on Thursday, its worst trading session since the company went public in 2004, as investors punished a third-quarter report that missed Wall Street's expectations on both revenue and profit and showed cash flowing out the door to pay for artificial intelligence.

The sell-off followed the company's results on Wednesday, after which shares fell more than 10% in extended trading from a close of $322.22. Revenue grew 25% from a year ago, but the report was Alphabet's first top-and-bottom-line miss in nearly four years, according to CNBC. Net income fell to $26.17 billion, or $2.12 per share, from $34.98 billion, or $2.87 per share, in the same quarter last year. Operating income came in at $40.58 billion, short of the $43.19 billion analysts polled by FactSet had expected.

The number that rattled investors most was free cash flow, the money left over after a company pays for its operations and its equipment. Alphabet reported negative free cash flow of $9.07 billion for the quarter. Analysts had expected a deficit of only $2.70 billion. The company spent $51.36 billion on capital expenditures in the quarter, slightly less than the $55.09 billion analysts had forecast, but its borrowing jumped. Long-term debt climbed to $125.1 billion, up from $21.6 billion a year earlier, an increase of about 479%.

Finance chief Anat Ashkenazi told analysts the company expects its spending to "increase significantly in 2027." Alphabet kept its 2026 capital spending forecast at between $195 billion and $205 billion, after raising it from $190 billion in the second quarter. CNBC reported that annual spending is expected to top $200 billion this year before exceeding $300 billion in 2027. Investors have been looking for proof that the enormous bills hyperscale cloud companies are paying for AI data centers will earn a return.

The company's stakes in other businesses also hurt the quarter. Alphabet booked a $99.03 billion windfall from its equity holdings in the second quarter, driven by its investments in SpaceX and Anthropic. In the third quarter, that line swung to a loss of $8.66 billion.

There were bright spots. Google Cloud revenue more than doubled to $30.7 billion, ahead of the $28.7 billion analysts expected, and Thomas Kurian, the Cloud CEO, said in his first public earnings-call remarks that the company is seeing "extraordinary demand and strong growth from both AI labs, capital markets, financial service institutions, and enterprises." Google said its Gemini app reached 1 billion users, the fastest-growing product in the company's history. CEO Sundar Pichai said demand is strong for the recently launched Argon model and that its newer Carbon version, announced Wednesday, outperforms Argon "on almost every domain."

Still, the strength in the cloud business did not offset the weakness elsewhere. "The cloud business was the only business that beat at 103% growth," Jefferies analyst Brent Thill said on CNBC. "The Street wanted 100%, so it didn't beat by much, and it missed some of the high-end targets. Everything else missed." Search revenue rose 12% to $63.35 billion, below the $64.96 billion analysts had projected, even as Pichai said AI investments produced the company's highest query growth rate in five years.

The drop wiped out roughly $500 billion in market value, according to a Slashdot summary citing Yahoo Finance, far more than the previous record single-day loss of about $275 billion on July 23. CBS News described the fall as investor worry about AI-related spending, and the sell-off is likely to sharpen questions about whether other big technology companies can keep funding their AI buildouts out of cash flow instead of debt.