A record decline takes shape before the opening bell
Alphabet's stock traded 10% lower ahead of Thursday's opening, putting the Google parent on course for its sharpest one-day reaction to results since its 2004 listing. A close more than 9.77% below the previous level would make it the company's worst post-earnings session on record. Microsoft moved the other way, gaining almost 4% in premarket activity. Futures on the Nasdaq-100 were down more than 1% early in the day.[S1][S2]
The divergence followed third-quarter reports that put spending and cash generation side by side. Microsoft recorded $45.2 billion in capital expenditures and finance leases for the quarter, up 30% from a year earlier but under the $50.67 billion analysts had projected. Its free cash flow declined 27% to $18.63 billion while staying positive. Alphabet posted negative free cash flow of $9.07 billion, far worse than the $2.70 billion shortfall analysts had anticipated.[S1]
Search advertising misses as AI rivals gain ground
Alphabet's largest revenue engine, search advertising, expanded 12% in the September quarter to $63.35 billion, yet the figure fell short of analyst expectations and added to selling pressure on the shares. The company kept its full-year capital expenditure guidance at $195 billion to $205 billion. Investors have been examining the AI budgets of large technology firms and asking when those outlays will translate into returns.[S1]
Philipp Schindler, Alphabet's chief business officer, attributed part of the search impact to weaker monetization inside the company's AI Mode, and said ads are being scaled within AI Overviews and AI Mode, including abroad. Google's search franchise has been pressured by chatbots from OpenAI and Anthropic as users conduct more queries elsewhere, while the company's own Gemini assistant has lagged competitors.[S1]
Analysts see discipline at Microsoft and a muddled call at Google
Ben Barringer, global head of technology research at Quilter Cheviot, described Microsoft as expanding its architecture in a measured fashion, which he said leaves fewer surprises. He characterized Alphabet's results as fairly messy and its earnings call as poorly handled, noting that the share price came under pressure after hours.[S1]
Barringer also argued that Google confronts an innovator's dilemma, torn between defending its core business and embracing the disruption, and said the company has lost its edge with Gemini and trails peers in agentic AI. A separate analyst commentary carried by Yahoo Finance contended that investors underestimate Alphabet's AI strength, even as the stock tumbled more than 10% before the open.[S1][S2]
