Alphabet lost nearly $500 billion in market value on Thursday as its shares recorded one of their steepest single-day declines in recent history following quarterly results that fell short of expectations.
Alphabet shares fell nearly 13% to close at $283.82. The decline marked the second-largest single-day loss in market value for a company. The record is held by Nvidia, which lost $598 billion in market value in January 2025.
The company reported third-quarter revenue of $127.6 billion, up 25% from the same period last year but below analysts’ expectations of $128.2 billion. Its adjusted earnings also missed forecasts, coming in at $2.67 per share, compared with the expected $3.02.
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Much of the concern surrounding Alphabet centered on Google’s advertising business, its largest source of revenue. Search advertising revenue grew 12% year over year, slowing from 17% growth in the previous quarter. The company also acknowledged that its own AI features could be affecting how it generates advertising revenue.
Google Chief Business Officer Philipp Schindler told investors that growing use of AI Mode was eating into revenue from ads displayed alongside traditional search results. AI-generated search responses offer fewer opportunities to display ads than conventional search results.
Schindler added that the company was looking for ways to introduce ads into AI Mode, although new formats were still in development.
At the same time, Alphabet is spending heavily to expand its computing infrastructure. It spent nearly $51.4 billion on capital expenditures during the quarter, primarily on data centers and computing infrastructure needed to support its expanding AI operations. The company forecast capital expenditures of between $195 billion and $205 billion this year, more than double what it spent last year. The company has also indicated that spending will increase further in 2027.
The spending contributed to negative free cash flow of $9.1 billion for the quarter, marking the second consecutive quarter in which Alphabet’s cash outflows exceeded the cash generated after capital expenditures.
In contrast, Google Cloud revenue more than doubled to $30.7 billion, rising 103% from the previous year. The Gemini app also surpassed 1 billion users.
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Investors remain concerned about whether revenue from AI services will be sufficient to cover the enormous costs of building and operating the infrastructure.
Tech giants including Meta, Alphabet and Amazon are reportedly on track to spend more than $700 billion collectively this year on AI chips and infrastructure. In contrast, Microsoft shares rose nearly 2.9% in after-hours trading in New York on Wednesday.