Alphabet shares slide as free cash flow stays negative

Alphabet’s stock fell 12.3%, wiping a record $500 billion from its market capitalization, while the Nasdaq declined 1.4%.[1] CNBC reported the shares fell about 13% on Thursday, their steepest drop on record.[2] The decline came alongside a $9 billion free-cash-flow deficit for the quarter, three times the estimated shortfall.[2] Investors weighing the results should distinguish the market’s reaction from the operating figures: Alphabet reported revenue growth, but the cash-flow figure and advertising performance were weaker than expected.[2][3]

Alphabet’s free cash flow first turned negative in the second quarter, when the deficit was $5.9 billion; it reached negative $9 billion in the quarter covered by the latest report.[2] The company maintained its 2026 capital expenditure forecast at $195 billion to $205 billion and said spending would rise significantly in 2027.[2] The company’s quoted explanation noted that cash comes in as it delivers and bills customers for TPU systems.[2] For professionals tracking the investment cycle, the figures show a near-term cash outflow alongside a forecast of higher future spending; they do not, by themselves, establish when that investment will pay off.[2]

Revenue grew 25% year over year to $127.6 billion in the three months through September, but Alphabet earned less than analysts predicted, particularly in advertising.[3] Search and other revenue rose 12% to roughly $63 billion, missing estimates for the second consecutive quarter, even as Search query growth reached its highest level in five years.[2][4] Alphabet executives said foreign exchange was the biggest factor in slower Search revenue growth.[2] Google Cloud revenue more than doubled to nearly $31 billion, and its backlog reached roughly $560 billion; management expected just over half to be recognized over the following 24 months.[2]

Alphabet reported that first-party model APIs processed nearly 32 billion tokens per minute, 40% more than in the previous quarter, and that the Gemini app reached one billion users.[4] In the third quarter, Gemini models helped advertisers generate more than 1.5 billion campaign assets, up over sevenfold year over year.[4] Google also made its biggest product-listing-ads update in a decade, adding AI capabilities.[4] At the same time, the BBC reported that Google’s AI Mode was eating into advertising revenue from traditional search results, and CNBC said the results would bring Search cannibalization fears back to the forefront.[3][2]