Alphabet dropped roughly 10% in premarket trading on Thursday, putting the Google parent on track for the sharpest fall it has ever recorded after an earnings report. The company has traded publicly since 2004, and any close worse than 9.77% down on the day would set a new post-results low. Microsoft moved the other way, gaining nearly 4% as the two giants reported third-quarter numbers hours apart.
What separated them was how each had been spending on artificial intelligence and what that left in the bank. Microsoft logged $45.2 billion in capital expenditure and finance leases for the quarter, a 30% jump on a year earlier but short of the $50.67 billion analysts had modelled. Its free cash flow slipped 27% to $18.63 billion, yet it held above zero.
Alphabet could not say the same. It reported negative free cash flow of $9.07 billion for the quarter, a far deeper hole than the $2.70 billion shortfall analysts had expected. The company stuck with its full-year capital expenditure range of $195 billion to $205 billion.
Ben Barringer, global head of technology research at Quilter Cheviot, saw a tidier story at Microsoft. “Microsoft is building out its architecture in a measured way and as such contains fewer surprises,” he said on Thursday. “Alphabet, by contrast, saw its share price hit after hours as a result of a fairly messy set of results and a poorly handled earnings call.”
Nasdaq-100 futures were off more than 1% early on Thursday.
Search advertising, still Alphabet’s biggest earner, rose 12% in the September quarter to $63.35 billion but came in under forecasts, piling more weight on the stock. Chief business officer Philipp Schindler put some of the softness down to lower monetisation inside the company’s AI Mode, saying Alphabet was now building more advertising into its AI Overviews and AI Mode products, international markets included.
Google’s search engine has been under strain from rival chatbots including OpenAI’s ChatGPT and Anthropic’s Claude, with some queries now handled elsewhere. Gemini, Google’s own assistant, has not kept pace.
Barringer argued the company is caught between defending its core and chasing the shift. “As such, Google has lost its edge with Gemini and is behind peers on agentic AI,” he said.
