AI boom worries deepen as Alphabet posts lackluster results

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Shares of Google parent Alphabet sank more than 12 percent on Thursday, October 29, after disappointing quarterly results intensified concerns about whether heavy artificial intelligence (AI) spending will generate sufficient returns.

The stock fell 12.6 percent, its worst one-day decline since Alphabet went public in 2004, erasing roughly $500 billion in market value, CNBC and CNN reported.

Alphabet reported third-quarter revenue of $127.58 billion, up 25 percent year over year, but below Wall Street’s roughly $128.2 billion forecast.

Adjusted earnings per share were $2.67 against an expected $3.02.

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Search advertising, Alphabet’s core business, grew 12 percent to $63.35 billion but missed expectations.

Google Cloud revenue roughly doubled to $30.7 billion, exceeding projections.

Investors were also alarmed by negative free cash flow of $9.07 billion in the quarter, compared with an expected positive $2.7 billion, reflecting the cost of data centres and AI infrastructure.

Alphabet said lower monetisation rates for AI Mode queries contributed to slower search growth.

The company’s results dragged the Nasdaq lower as investors reassessed valuations across the AI trade.

The sell-off shows that markets are scrutinising AI investment more closely. Alphabet’s weak search growth and cash-flow pressure raise questions about whether AI spending can be offset quickly by advertising and cloud revenue.

Watch Alphabet’s next earnings report, capital-expenditure guidance and AI monetization metrics.

Analysts will assess whether search advertising stabilises, cloud growth continues and free cash flow returns to positive territory.

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