Alphabet lost $500 billion in market value after report on AI spending and slowdown in search advertising

Alphabet, which owns Google, saw its shares fall 13% on October 29 after the quarterly results were published.

This was reported by the Financial Times.

The company lost roughly $500 billion in market value: its financial results missed expectations, and Google acknowledged that search in AI mode generates less advertising revenue and is cannibalizing some queries from traditional search.

This is the largest decline in market value in Alphabet’s history and the second-largest on Wall Street. Only NVIDIA lost more in a single day — $593 billion in January 2025.

How AI mode affects Google’s advertising business

In the third quarter, revenue of Alphabet’s largest division, which includes search advertising, grew 12% year on year — to $63.4 billion.

Analysts had expected $64.9 billion. Earlier in the year the growth rate was approaching 20%.

Google’s Chief Business Officer Philipp Schindler acknowledged that queries via AI mode are partially replacing traditional search. It provides conversational text answers instead of a list of links, but generates less advertising revenue for the company.

How much Alphabet is spending on AI

Alphabet’s capital expenditures — money for infrastructure and equipment — rose to $51.3 billion in the third quarter, up from $44.9 billion in the previous quarter. Heavy investments in AI were the main reason for the negative cash flow: it amounted to minus $9.1 billion.

This is only the second quarter with negative cash flow since Google went public in 2004.

Alphabet’s chief financial officer Anat Ashkenazi confirmed that capital expenditures could reach $205 billion by year-end. That implies the possibility of spending up to $73.1 billion in the fourth quarter.

The company also disclosed future commitments of more than $1 trillion. They cover purchases and leases of data centers, equipment, energy supply and other costs.

Alphabet’s total revenue rose 25% — to $127.6 billion — but slightly missed the average analyst forecast.

Net income fell 25% — to $26.2 billion versus expected $37.3 billion. It was affected by losses from changes in the value of investments: overall they totaled $8.7 billion. In particular, the value of SpaceX, in which Alphabet holds a stake, fell by about 4% over the quarter.

Recall, in early October 2026 Google introduced the new AI model Gemini 4 Argon, which can generate up to 1 million output tokens in a single run — versus 64 thousand in the previous limit.

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