Alphabet Loses $500bn as AI Search Cuts Ads — SkimNews
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- Alphabet shed just over $500bn (£374bn) in market value on Thursday, falling to $3.46tn from $3.97tn as its stock hit a six-month low and lost almost 13%, its second-lowest showing this year.
- Alphabet generated $127.6bn in quarterly revenue, up 25% year over year, while Google Cloud revenue rose 103% to almost $31bn; profits fell 25%.
- Alphabet posted negative free cash flow of more than $9bn, nearly twice the outflow three months earlier and only its second negative-cash-flow quarter as a public company.
- Google Search now defaults to AI summaries, which reduced the number of ads Alphabet could sell during the quarter; ads alongside search results generate the vast majority of its business.
- Tracy Woo of Forrester said Alphabet’s search result highlighted “the challenge of funding massive AI investments while maintaining the strength of established businesses.”
- Amazon reported 11% quarterly sales growth to $201bn alongside negative cash flow of $42bn, sixfold higher than three months earlier; shares fell 6% in after-hours trading.
- Andy Jassy said Amazon may have two $1tn-revenue businesses in the next 5-10 years, but did not specify what those businesses are.
Why it matters: Alphabet’s 25% profit decline and $9bn-plus cash outflow show that AI spending is already weighing on the company whose search ads make up the vast majority of business. Amazon’s $42bn outflow and 6% after-hours drop show the same investor test: huge spending plans now require established businesses to keep growing.
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