Tuesday, July 21, 2026, at Google headquarters in Mountain View, California, USA.
David Paul Morris | Bloomberg | Getty Images
alphabet Stocks fell sharply in pre-market trading on Thursday, but microsoft Shares rose as investors focused on the tech giant’s latest spending and free cash flow numbers in its third-quarter results.
Alphabet fell 10% in premarket trading, while Microsoft rose nearly 4%.
If Alphabet were to close more than 9.77% lower on Thursday, it would be the worst post-earnings reaction ever. The company went public in 2004.
Microsoft reported third-quarter capital spending and finance leases of $45.2 billion, up 30% from the same period last year but below analysts’ expectations of $50.67 billion. Free cash flow fell 27% to $18.63 billion, but remained positive.
By contrast, Alphabet’s third-quarter free cash flow was negative $9.07 billion, well below analysts’ expectations of $2.7 billion. Google’s parent company maintained its full-year capital spending outlook of $195 billion to $205 billion.
The earnings report comes as investors scrutinize technology companies’ AI spending plans and focus on the returns they can get from their investments.
Ben Barringer, global head of technology research at Quilter Cheviot, said Thursday that “Microsoft has built its architecture in a deliberate way, so there are few surprises.”
“In contrast, Alphabet’s stock price plummeted after hours as a result of a rather chaotic series of earnings results and inadequate earnings reporting,” Ballinger added.
Nasdaq 100 futures fell more than 1% early Thursday.
Search under pressure
Search advertising, Alphabet’s biggest source of revenue, rose 12% to $63.35 billion in the September quarter, but fell short of analysts’ expectations, further increasing pressure on the company’s stock.
Philipp Schindler, Alphabet’s chief business officer, said the impact on its search business was due in part to lower monetization in the company’s AI mode. He added that Alphabet is currently “expanding” advertising within its AI Overview and AI Mode products, including in international markets.
Google’s search business is facing headwinds from the rise of other AI chatbots, such as OpenAI’s ChatGPT and Anthropic’s Claude. Users are likely to perform more search queries outside of Google. Gemini, Google’s own AI chatbot, hasn’t kept up with that pace.
“The problem for Google is that it faces an innovator’s dilemma, not knowing whether to protect its core business or aim to join the disruption. As a result, Google is losing its edge over Gemini and falling behind its peers in agent AI,” Ballinger said.
-CNBC’s Robert Hum, Samantha Subin and Jordan Novelt contributed reporting.
