Alphabet reported strong third-quarter sales growth but negative free cash flow as capital spending exceeded operating cash generation, a contrast that coincided with a sharp share decline Thursday.
The Associated Press reported Alphabet shares down 12.3% at 12:32 p.m. EDT, with the Nasdaq Composite down 1.3% as most other stocks rose. Reuters had reported an 11.7% decline in earlier market coverage. Reuters and AP described investor concerns about the expense of AI investment and the cash it requires.
Alphabet’s revenue reached $127.577 billion for the quarter ended Sept. 30, up 25% from a year earlier. Google Search and other revenue rose 12% to $63.350 billion, and Google Cloud revenue increased 103% to $30.709 billion. Free cash flow was negative $9.065 billion after purchases of property and equipment totaled $51.355 billion, compared with $42.290 billion in operating cash flow.
Sundar Pichai, CEO of Google and Alphabet, said AI investments were driving overall Search query growth, including commercial queries. CNBC’s Oct. 29 Investing Club column by Jim Cramer included Alphabet, Microsoft, Marvell Technology, Fortinet and ServiceNow in a 10-item watchlist, along with companies in memory chips, health care, industrial gases, restaurants and freight. Cramer wrote that “tech is taking it on the chin.”
Microsoft reported fiscal first-quarter revenue of $92.279 billion, up 19% year over year. Microsoft Cloud revenue rose 30% to $63.9 billion, and Azure revenue grew 48%. CNBC’s morning report put Microsoft shares up about 3%; Reuters later reported a 1.5% decline.
Reuters reported that Fortinet and ServiceNow shares fell more than 20% after their results. Fortinet’s revenue grew 20% to $2.08 billion, and it raised its 2026 revenue outlook. ServiceNow reported revenue growth of 20.5% to $4.106 billion and raised its full-year subscription revenue and free cash flow margin outlook.
Bloomberg reported, citing people familiar with private discussions, that Marvell was in advanced talks to buy Lumentum. Neither company had confirmed a deal. Reuters reported Marvell shares down 11.6% and Lumentum up 3.5% in its Thursday market coverage.
The earnings arrived as the Bureau of Economic Analysis (BEA) reported U.S. real GDP growth at a 3.4% annual rate in the third quarter and September personal consumption expenditures (PCE) inflation at 3.6% year over year. The Federal Reserve kept its target range at 3.75% to 4.00% on Oct. 28 and said inflation remained elevated. The BEA’s next GDP and Personal Income and Outlays releases are scheduled for Nov. 25 at 8:30 a.m. ET; the next Federal Open Market Committee meeting is Dec. 8-9.
