AI search slows ads: Alphabet shares slump in Thursday trading
Google's parent lost about 12% at one point on Thursday as investors questioned whether its huge AI spending will pay off, with growth in its search business slowing.
Archive image · Photo: Grendelkhan / Wikimedia Commons, CC BY-SA 3.0 (cropped and resized)
Alphabet shares tumbled as much as about 12% during trading on Thursday, after already losing about 10% in after-hours trading on Wednesday. The tech-heavy Nasdaq 100 also fell at times. Microsoft shares were down about 1%.
The slide followed quarterly results released on Wednesday evening: total advertising revenue of $82 billion fell about $1.4 billion short of expectations. Chief business officer Philipp Schindler attributed the larger-than-expected slowdown in search ad growth to greater use of AI Mode, Reuters reported. Free cash flow also turned negative due to heavy spending on data centers. Alphabet plans capital expenditures of $195 billion to $205 billion for 2026 and a significant increase for 2027.
The cloud unit remains a bright spot: its revenue more than doubled to $30.7 billion, and its backlog stands at $561 billion. "In a market worried about AI cannibalizing the franchise, investors need to see search accelerating, not decelerating," Dave Wagner of Aptus Capital Advisors told Reuters.