Google parent Alphabet loses nearly $500 billion after AI summaries affect ad sales

Alphabet, Google’s parent company, saw its market value fall from $3.97 trillion to $3.46 trillion, while its shares dropped almost 13% to a six-month low. Although quarterly revenue rose 25% to $127.6 billion and Google Cloud revenue grew 103% to nearly $31 billion, profit fell 25%. The company also reported more than $9 billion in negative free cash flow, with the additional spending devoted almost entirely to AI investments. Google Search now defaults to AI summaries, which affected the number of ads sold, Alphabet’s main source of revenue.

The reaction to Microsoft’s results was milder: its shares fell by less than 1%, while the company spent about $5 billion less on AI investments. Microsoft’s revenue rose 19% to $92.3 billion, and the company said tasks automated by Copilot had nearly doubled since July, with daily users up 500% from a year earlier.