The drop followed Alphabet’s release of its quarterly results on Wednesday (Oct. 28), which stoked investors’ fears about how the company is being impacted by the rise of artificial intelligence (AI), according to the report.
Those results showed that the growth of Google Search revenue slowed to 12% year over year in the third quarter, down from 17% in the third quarter, suggesting that consumers are turning to AI chatbots instead of the company’s search engine as they look for products, the report said.
Alphabet’s third quarter results also showed higher-than-expected operating expenses and negative free cash flow, which the WSJ attributed to the company’s spending on AI models and data centers.
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Bloomberg reported Thursday that Alphabet’s third quarter sales of $111.2 billion were less than analysts had expected and that the company’s ad sales grew at the slowest pace in five quarters.
The report also said that Alphabet’s future obligations to buy data centers, computing power, energy and other resources have surpassed $1 trillion.
Alphabet reported negative free cash flow for two quarters in a row, after having never done so since going public, according to the report.
Google Cloud, whose customers include Anthropic and other AI competitors, reported greater sales and profit than analysts had forecast, per the report.
Reuters reported Thursday that in the wake of Alphabet’s report, the three major U.S. equity indexes lost ground, with the tech-focused Nasdaq seeing the biggest drop.
It was also reported Thursday that while Alphabet has said demand for cloud services is rapidly increasing, the company’s quarterly filing showed that upward of a third of that quarterly growth stems from a joint venture that Alphabet partially owns.
PYMNTS reported Wednesday that Alphabet’s third-quarter results returned the focus to concerns that Big Tech’s AI spending could outrun the earnings and cash needed to justify it. The report said that the company spent $51.4 billion on capital investments and reported negative free cash flow of $9.1 billion.
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