Alphabet’s quarterly results showed mixed performance, with total revenue rising 25% year-over-year to $127.6 billion, driven largely by a surge in Google Cloud earnings that climbed 103% to nearly $31 billion.
However, the company reported a 25% decline in profits and negative free cash flow exceeding $9 billion—nearly double the shortfall from the previous quarter. The increased spending is almost entirely directed toward Google’s artificial intelligence initiatives.
By Thursday’s close, Alphabet’s market valuation had fallen to $3.46 trillion from $3.97 trillion the prior day. The decline correlates with shifts in Google Search, which now defaults to AI-generated summaries, impacting advertising revenue. Since search-related ads constitute the bulk of Alphabet’s business, any disruption to its core search functionality carries significant weight.
Analyst Tracy Woo of Forrester noted that the results underscore the difficulty of funding large-scale AI investments while preserving the strength of established operations. Google’s chief business officer, Phillip Schindler, expressed confidence in the company’s AI-focused search trajectory, yet shares still dropped nearly 13% on Thursday—the second-lowest performance so far this year.
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