Alphabet Stock Plunge: Shares Fall 12.6%, Wiping $482 Billion in Market Value Amid AI Spending Concerns
Alphabet loses $482 billion in market value: Alphabet (parent company of Google) had a very bad day on the Nasdaq on Thursday (29th October 2026) with its shares down 12.64% at $283.82. That was a loss of approximately $482bn in market value and represents Alphabet's largest single day drop since it went public in 2004.
Alphabet Stock Plunge: Question Arises Over Massive Investment in AI
Alphabet share price: Alphabet shares continued to fall in pre-market trading on Friday (October 30, 2026), down another 0.42% to $282.64 according to Yahoo Finance. The sell-off occurred following the release of the company's results for the quarter, which once again raised the question of whether the massive investment in AI will in fact deliver a return.
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Alphabet Stock Drop After Earnings
Alphabet Stock Plunge: Revenue for the quarter ended September 30 rose 25% year on year to $127.6bn. Net profit was down to $26.5bn from $35bn a year earlier, primarily due to losses on equity investments. Operating earnings were up 30% to $40.6bn. Google Cloud was the standout performer in the quarter with revenue up 103% year on year to $30.7bn.
Operating income for the division was up to $11.1bn from $3.6bn. The growth was driven by strong demand for AI infrastructure, AI solutions and its core cloud services. The investment required to support this growth is however having a negative impact on the company's cash flow.
Alphabet AI Spending Concerns
Alphabet Stock Plunge: Capital expenditure for the quarter was $51.4bn (mostly on data centres, servers and networking equipment). The company reported $42.3bn in cash from operations in the quarter. As capital expenditure was higher than cash from operations, the company reported negative free cash flow.
CFO Anat Ashkenazi attributed this to the level of infrastructure spending. She also pointed to a build-up of inventory of Google's AI chips (TPUs) and a $5.2bn payment to the European Commission as factors. Alphabet has maintained its 2026 capital expenditure forecast at $195bn-$205bn.
The $51.4bn spent in the September quarter is roughly a quarter of the amount the company expects to spend this year. Ms Ashkenazi said capital spending will rise significantly in 2027 and that high levels of spending are likely to continue. Investors are also keen to see the impact of AI on Google's core Search advertising business.
Google Search ad Revenue Slowdown
Alphabet Stock Plunge: Revenue from Google Search and related ads was up 12% year on year to $63.35bn (slower than the 17% growth in the prior quarter). This is part of Google's total advertising revenue of $82bn which also includes advertising on YouTube and the Google Network.
During the October 28 earnings call, Philipp Schindler, Google's senior vice president and chief business officer, said that there is a higher volume of queries coming through AI Mode (Google's AI-powered search service) and this is having an impact on advertising revenue. Google makes less from these queries than from traditional Search. Mr Schindler said that Google is currently in the process of testing ads in the AI features such as AI Overviews and AI Mode.
He also cited changes in foreign exchange rates as the primary reason for the slower growth in Search revenue compared to the prior quarter. Trends in retail, media and entertainment advertising also played a part. At the same time, usage of Search has increased. CEO Sundar Pichai said that year on year growth in Search queries was the highest in five years. He added that Google's AI investments are driving this growth, particularly in the commercial query space.
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