Alphabet’s shares fell about 13% on Thursday, October 29, the steepest one-day decline in the company’s history as a public company, according to CNBC, which put the loss at roughly $500 billion in market value. The sell-off followed the company’s third-quarter report on Wednesday. Revenue from Google Search and other products grew 12% to $63.35 billion, below analyst estimates for a second straight quarter, and free cash flow for the quarter was negative by about $9 billion.

The Wall Street Journal, as cited by Fox Business, reported that Alphabet’s Class A shares closed at $283.82, down 12.64%, which erased about $499.8 billion of market value. The results did not show a decline in the business: revenue rose 25% and Google Cloud more than doubled. What troubled investors was a combination of slowing search growth, heavier spending and a cash-flow figure that came in far worse than analysts had projected.

What the quarter showed

Alphabet’s earnings release, filed with the Securities and Exchange Commission, reports revenue of $127.6 billion for the quarter ended September 30, up 25% from $102.3 billion a year earlier. Operating income rose 30% to $40.6 billion. Net income available to common stockholders fell to $26.2 billion from $35.0 billion, and diluted earnings per share were $2.12 against $2.87. The company said a net loss of $8.7 billion on equity securities, compared with a $10.7 billion gain a year earlier, reduced net income by $6.7 billion and earnings per share by $0.55.

CNBC, which reported adjusted earnings of $2.67 per share, said Alphabet missed analysts’ expectations on both revenue and profit, the first time that had happened in nearly four years. CNBC cited consensus estimates from LSEG but did not give the consensus figures in the article.

Search is the part that drew the most attention. Alphabet’s search-and-other revenue line grew from $56.6 billion to $63.35 billion, a rise of about 12%. CNBC reported that growth in that line was 19% in the first quarter, 17% in the second and 12% in the third. It also reported that UBS had expected $64.9 billion for search, and that YouTube advertising revenue of $11.2 billion fell short of the $11.4 billion UBS expected.

Google said, according to CNBC, that search query growth in the quarter was the strongest in five years. That contrast between usage and revenue is at the center of the debate over whether artificial intelligence features are changing how profitable each search is.

What management said about search

On the earnings call, Philipp Schindler, Alphabet’s chief business officer, said currency was the largest single reason search growth slowed from the second quarter to the third, according to a transcript published by Investing.com. Chief financial officer Anat Ashkenazi said the currency headwind to consolidated revenue would be slightly larger in the fourth quarter. The transcript is marked as machine-assisted and has some garbled passages, so exact wording should be checked against the call recording.

Schindler also tied part of the weakness to AI Mode, Google’s conversational search product. CNBC reported that he linked the shortfall partly to lower monetization within AI Mode. In the transcript he is quoted as citing “the lower monetization we were seeing in AI Mode.” He said most AI Mode queries are additional rather than substituting for traditional searches, and that Alphabet is expanding ads inside AI Overviews and AI Mode to more users and queries, including outside the United States.

How analysts read it

The reaction from the research desks was split between those who see a temporary squeeze and those who see the first sign of structural change. Citizens downgraded the stock to Market Perform, with analyst Andrew Boone writing that monetization looked challenged and that search faced difficult comparisons with last year. Bank of America cut its price target to $380 from $430, BMO to $425 from $480 and UBS to $332 from $380, according to CNBC. Morgan Stanley kept its Overweight rating and $375 target.

UBS wrote that Google’s tone on monetizing AI queries was more measured than the firm had expected, which it read as a signal of slower ad revenue growth. Mizuho’s Jordan Klein said the numbers are a problem for both Search and YouTube and that they heighten fears that AI and agentic tools will take share from them. Gil Luria of D.A. Davidson said the fears about AI’s effect on Google that circulated from 2023 to 2025 now appear to be showing up in the business, but added, “We would not rush to conclusions based on one quarter.”

Others argued the other side. Scott Devitt of Rosenblatt Securities said the pressure on search is not a fundamental break and that Alphabet’s dominant position could help once the shift from search to AI assistants settles. Ben Barringer of Quilter Cheviot took a harsher view, calling the results messy and the earnings call poorly handled, and arguing that Google is behind peers on agentic AI. Baird and JPMorgan, per CNBC, described the reaction as overdone or the search headwinds as manageable rather than permanent.

Cash, spending and the cloud

Free cash flow was negative $9.07 billion, which Alphabet’s release shows as operating cash flow of $42.3 billion less capital expenditures of $51.4 billion. CNBC reported that analysts had expected a deficit of about $2.7 billion, so the actual shortfall was roughly three times the estimate. In the second quarter, free cash flow was negative $5.9 billion, which CNBC described as the first negative quarter in Alphabet’s history as a public company. Over the trailing twelve months, free cash flow remained positive at $19.7 billion, according to the release.

Capital expenditures of $51.4 billion compare with $24.0 billion in the same quarter a year earlier. Ashkenazi said on the call that about 65% went to servers and networking and about 35% to data centers, according to the transcript. Alphabet held its 2026 capital-spending forecast at $195 billion to $205 billion and said spending will rise significantly in 2027, with details to come on the fourth-quarter call.

Google Cloud was the strong spot. Revenue rose 103% to $30.7 billion from $15.2 billion, and operating income was $11.1 billion against $3.6 billion a year earlier, which works out to a margin of about 36% compared with about 24%, based on the figures in the release. Fox Business reported that cloud revenue was above the $29.2 billion analysts had expected. CNBC reported that cloud backlog reached about $560 billion, with just over half expected to be recognized as revenue within 24 months.

The cloud numbers carry a cost. Ashkenazi said Alphabet is short of capacity and began using third-party computing power at the end of the quarter, ramping in the fourth, and that it expects margin headwinds in the near term as it uses that capacity, according to the transcript. Fox Business reported that she warned cloud profitability could be squeezed in the near term for that reason. Alphabet also sells its tensor processing units, its in-house AI chips, to outside customers, a business CNBC said began in the second quarter. Ashkenazi described the cash cycle as money going out first as inventory is built and coming in when systems are delivered and billed.

How it compares with Microsoft and the rest

Microsoft reported on the same day and its shares were roughly flat on Thursday, according to CNBC. Azure revenue rose 48% to $33.2 billion. Microsoft’s capital spending, including finance leases, was $45.2 billion, up 30% but below the $50.67 billion analysts had projected, and its free cash flow fell 27% to $18.63 billion while staying positive. CNBC separately reported that Microsoft cut its full-year capital-spending forecast to $170 billion from $175 billion, and that chief financial officer Amy Hood said delays from third-party GPU providers would push some capacity into the first half of 2027.

Meta, which reported the week before, expects full-year capital spending of $135 billion to $145 billion, CNBC reported. Combined capital spending by the largest cloud companies is expected to exceed $1 trillion next year, according to the same article, which cited a Bloomberg-linked estimate from a September 25 report that put the figure at about $1.2 trillion, a rise of roughly 50%.

CNBC also reported that shares of CoreWeave, Nebius and IREN, which rent computing capacity to larger companies, fell after the reports, as did Oracle. CNBC’s summary of the market mood was that investors are scrutinizing AI spending and whether it will produce returns.

Two ways to measure a record

Sources describe the size of the drop differently. CNBC said the roughly 13% fall was the steepest on record in percentage terms and exceeded the previous record decline of 11.63% in March 2020. The Wall Street Journal, via Fox Business, described the roughly $500 billion loss as the second-largest single-day loss of market value in stock-market history, behind Nvidia’s drop of about $589 billion in January 2025. Fox Business also cited Forbes as saying Alphabet’s earlier record loss in dollar terms was about $275 billion in July.

The two claims are compatible because one counts percentages and the other counts dollars. Lens analysis: because Alphabet’s market value is so large, a drop of that size in percentage terms translates into one of the biggest dollar losses ever recorded.

What to watch

The next test is the fourth-quarter report, when Alphabet has said it will give details on 2027 capital spending. Amazon was due to report after the close on Thursday, according to CNBC, and its results were not part of the reporting reviewed for this article.

Lens analysis: the market’s reaction suggests investors are treating Alphabet’s two businesses differently. Cloud revenue is backed by contracts and a disclosed backlog, while the advertising business that funds much of the spending is the one facing questions about AI. If search revenue per query keeps falling as users shift to AI Mode, the company would be funding record capital spending from a slower-growing profit source. Management’s answer, in its own account, is that query growth is at a five-year high and that ad formats in AI products are still being rolled out.

Several analysts quoted by CNBC made the same point in different words: one quarter does not settle whether AI changes search economics for good. What the quarter did settle is that Wall Street will now judge Alphabet by the cash it produces as well as the growth it reports.

Sources

Image: Mountain View (CA, USA), Charleston Road, Google-Fahrräder -- 2022 -- 2901.jpg by Dietmar Rabich, CC BY-SA 4.0, via Wikimedia Commons. Illustrative photo; it does not show the events described.