Alphabet, Google’s parent company, lost just over $500bn (£374bn) in market value on Thursday, as investors reacted to its final business update of the year. According to BBC World, the update showed AI summaries hurting search ad revenue and heavy AI spending pushing free cash flow negative, fuelling Alphabet stock AI spending concerns.
Google’s stock hit a six-month low and fell almost 13% on the day, its second-lowest showing this year, according to BBC World. The company’s total stock market value fell to $3.46 trillion from $3.97 trillion the day before.
The company revealed that its AI summaries on search were affecting ad revenue. Search ads make up the vast majority of Alphabet’s business, and Google’s search engine now defaults to AI summaries of user queries.
The quarter was mixed. Total revenue grew 25% year on year to $127.6bn, but profits fell 25% during the quarter, according to BBC World. Alphabet also posted negative free cash flow of over $9bn, almost twice the cash loss shown three months earlier. Google Cloud revenue grew 103% to almost $31bn.
The wider sector also saw pressure. Amazon shares fell 6% in after-hours trading after its results showed negative cash flow of $42bn, while Microsoft shares fell by less than 1%.
Forrester analyst Tracy Woo said Alphabet’s search results "highlight the challenge of funding massive AI investments while maintaining the strength of established businesses."
The available reporting has gaps. This account rests on one full article, BBC World, and no second full source confirms the figures. A Japan Times headline and short excerpt described "disappointing search and advertising sales", but the details were not available. The pound figure is a conversion supplied by the BBC. The sources do not include a response from Alphabet or Google to the investor reaction, beyond a comment from its chief business officer on Wednesday.
Investors will be watching whether Alphabet can fund its AI investments while its core search business holds up. The sources do not describe any specific upcoming events.
Sources
This article was written with AI assistance from the published reporting listed above. It is part of the World Brief daily news podcast.