Alphabet, the parent company of Google, lost just over $500bn (£374bn) in value on Thursday after its latest quarterly update rattled Wall Street. Its stock hit a six-month low, and it fell by almost 13% on the day, according to the report.
The report says Google disclosed that its AI summaries in search were affecting ad revenue. The default AI summaries of a person's query reduced the number of ads the company could sell during the quarter. Ad sales on Google Search make up the vast majority of Alphabet's business.
Alphabet's total revenue grew 25% from a year earlier, to $127.6bn. Google Cloud revenue grew 103% to almost $31bn. Profits fell 25% during the quarter. The company also reported negative free cash flow of more than $9bn, almost twice the cash loss it showed three months earlier. The report says that new spending is almost entirely dedicated to Google's AI investments.
Tracy Woo, a principal analyst at Forrester, said Alphabet's search results "highlight the challenge of funding massive AI investments while maintaining the strength of established businesses." Phillip Schindler, Google's chief business officer, said on Wednesday that he felt "very good about our trajectory" with an AI-focused version of the search engine.
Amazon and Microsoft also reported this week. Amazon's shares fell 6% in after-hours trading after it reported quarterly sales of $201bn, up 11%, and negative cash flow of $42bn. Chief executive Andy Jassy said the spending was partly aimed at two businesses that he said could eventually bring in $1 trillion, without naming them. He pointed to Amazon's custom computer chips and its AI developer platform Bedrock.
Microsoft's shares fell by less than 1% on Thursday. Its revenue grew 19% to $92.3bn, and its cloud business grew 30% to $63bn. Chief executive Satya Nadella said automated tasks using Copilot had nearly doubled since July, and that daily users grew by 500% from a year earlier.