Alphabet Falls 12.9% as Free Cash Flow Turns Negative at $9.065 Billion
Key Facts
Alphabet shares fell 12.9% on Thursday as investors grew increasingly concerned about the cost of expanding in artificial intelligence and its pressure on liquidity, according to the Associated Press. GOOGL closed at $284.74 on October 29, compared with $324.89 in the previous session, according to EL7 data. The decline came after third-quarter results showed negative free cash flow of $9.065 billion, according to the company’s filing with the U.S. Securities and Exchange Commission. The AP said the stock’s drop weighed on the U.S. market, with the S&P 500 down 0.5% and the Nasdaq Composite down 1.5% when its report was published on Thursday.
Alphabet recorded $51.355 billion in purchases of property and equipment in the third quarter, compared with $23.953 billion in the same period a year earlier, according to the filing. This figure reflects spending on property and equipment, while Reuters linked the investment expansion to demand for artificial intelligence; it is not an item dedicated exclusively to AI infrastructure. Negative free cash flow was $9.065 billion, following negative $5.855 billion in the second quarter, compared with positive cash flow of $24.551 billion in the fourth quarter of 2025. Chief Financial Officer Anat Ashkenazi said building an inventory of TPU systems before delivering them to customers weighs on cash, alongside investment in data centers. Reuters reported that chip inventory earmarked for future orders drains liquidity before revenue is collected, making the timing of spending, delivery and collection part of the explanation for the decline in cash flow.
By contrast, Google Cloud revenue rose to $30.71 billion, exceeding the average analyst estimate of $29.57 billion, with growth of 95.1% expected, according to Reuters via MarketScreener. The coverage said the unit’s revenue more than doubled, driven by continued demand for AI services. This growth places cloud at the heart of the bet Alphabet is financing through increased infrastructure investment, but it coincides with clear pressure on cash in the third quarter. Net income available to common shareholders fell to $26.170 billion from $34.979 billion a year earlier. Diluted earnings per share fell to $2.12 from $2.87, according to the filing, showing that revenue growth did not prevent a decline in reported earnings.
The AP attributed part of the earnings decline to an $8.7 billion loss on equity investments, which reduced earnings per share by 55 cents. The AP said the quarterly results showed weaker-than-expected summer growth, while cloud and overall revenue growth remained strong. The market response thus focused on the gap between expansion in AI-related businesses and the cost of investment, liquidity and quarterly profitability.
Alphabet expects capital spending to rise “significantly” in 2027, the AP reported, citing the chief financial officer. Ashkenazi said spending details would be presented during the fourth-quarter earnings call. Reuters also said sales of TPU systems are poised to accelerate in 2027, after building inventory in advance weighed on cash before delivery and collection. This puts the spending trajectory and the timing of converting demand into revenue among the main points the company is expected to clarify in its next update. Third-quarter results remain a mix of strong revenue and cloud growth, against negative free cash flow and declines in net income and earnings per share.