Alphabet lost just over $500bn in value on Thursday after its latest business update, first reported by Bbc. Google’s AI summaries affected search ad revenue, while Alphabet reported a 25% profit decline and negative free cash flow in excess of $9bn as the new level of spending was almost entirely dedicated to Google’s AI investments.
Alphabet’s revenue grew 25% from a year earlier to $127.6bn, and Google Cloud revenue rose 103% to almost $31bn. Profits fell 25%, while free cash flow was negative in excess of $9bn, the second time in the company’s history as a public company.
The negative free cash flow was almost twice the loss of cash shown three months earlier. Google Search now defaults to AI summaries, and ads alongside search results make up the vast majority of Alphabet’s business.
AI appears in two distinct parts of the update: the new level of spending was almost entirely dedicated to Google’s AI investments, while AI summaries affected the number of ads Google could sell during the quarter. By Thursday’s close, Alphabet’s stock-market value had fallen to $3.46 trillion from $3.97 trillion the day before.
The company’s stock fell almost 13% on Thursday, its second-lowest showing this year, and hit a six-month low. Forrester principal analyst Tracy Woo said Alphabet’s search results highlighted the challenge of funding large AI investments while maintaining established businesses.
Amazon shares fell 6% in after-hours trading after the company reported quarterly sales growth of 11% to $201bn and negative cash flow of $42bn. Spending had increased six-fold over three months.
Chief executive Andy Jassy said Amazon was spending in part because it had a chance at two businesses that could bring in $1 trillion for the company in the future. He did not specify the two, but repeatedly discussed its own computer chips and Bedrock, an AI developer platform offering paying users access to most major AI models and tools.
Microsoft’s shares fell less than 1%. Revenue grew 19% year over year to $92.3bn and cloud revenue rose 30% to $63bn; the company spent around $5bn less on investments dedicated to AI and announced plans to cut thousands of workers, further reducing costs.
Chief executive Satya Nadella said daily Copilot users grew 500% from a year earlier and automated tasks nearly doubled since July. Woo said Microsoft’s results reinforced strong enterprise AI demand but left the larger question of where AI value would ultimately be captured.