Alphabet sheds $500bn as AI search costs hit ad revenue
Alphabet lost over $500bn in market value as AI search summaries cut ad sales; Amazon and Microsoft also reported heavy AI spending.
What you need to know
BBC News reports Alphabet lost just over $500bn in market value on Thursday, with shares falling almost 13% to a six-month low after its quarterly update showed AI search summaries affecting ad revenue, profits down 25%, and negative free cash flow above $9bn.
- Alphabet's market value fell to $3.46 trillion from $3.97 trillion the day before.
- Quarterly revenue rose 25% to $127.6bn, but profit fell 25% and free cash flow was negative by more than $9bn.
- AI summaries now default on Google search and reduced the number of ads sold during the quarter.
- Amazon shares fell 6% after hours on sales growth of 11% and negative free cash flow of $42bn.
- Microsoft shares slipped less than 1% despite revenue growth of 19% to $92.3bn.
Search ads under pressure
Alphabet's quarterly update showed total revenue growing 25% year on year to $127.6bn, helped by Google Cloud revenue growth of 103% to almost $31bn. Profit nonetheless fell 25%, and the company reported negative free cash flow above $9bn — the second such result in its history as a public company.
The results attributed pressure on ad sales to AI summaries now defaulting on Google search, which reduced the number of advertisements sold. Search advertising is the bulk of Alphabet's business. The stock fell almost 13% on Thursday.
Amazon and Microsoft spending
Amazon reported quarterly sales growth of 11% to $201bn alongside negative free cash flow of $42bn, and its shares fell 6% in after-hours trading. Chief executive Andy Jassy said the company could build two businesses that might each bring in $1 trillion, citing its own chips and the Bedrock AI platform, without naming them.
Microsoft shares fell less than 1% despite revenue growth of 19% to $92.3bn and cloud revenue growth of 30% to $63bn. The company spent around $5bn less on AI investments and has announced plans to cut thousands of workers. Forrester analyst Tracy Woo said the results show strong enterprise AI demand while raising the question of where AI value will ultimately be captured.
How much market value did Alphabet lose on Thursday?
BBC News reports Alphabet lost just over $500bn, with its total stock market value falling to $3.46 trillion from $3.97 trillion the day before. Shares fell almost 13% to a six-month low.
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