Key Highlights

● Alphabet's free cash flow turned negative in the third quarter.

● The company raised its 2026 capital spending forecast.

● Alphabet also missed on both revenue and earnings.

● Shares slid sharply in extended trading.

Alphabet's free cash flow turned negative in the third quarter, a striking development for one of the world's most profitable companies. The figure, reported after the close, came alongside an earnings miss and a higher capital spending forecast, and Alphabet shares slid sharply in extended trading.

Free cash flow measures the cash a company generates from operations after paying for capital investments such as data centers, servers and chips, and for years Alphabet's search advertising business has produced enormous amounts of cash, making a negative reading a signal that spending on AI infrastructure is now outpacing the cash coming in.

An Earnings Miss as Well

Alphabet also missed estimates, with earnings and revenue both coming in below consensus. Search revenue and YouTube ad revenue both fell short, though Google Cloud beat expectations, with revenue more than doubling, and the Gemini app reaching 1 billion users.

Net income fell sharply from a year earlier, with an equity-stake loss weighing on results.

The Broader Debate

Alphabet is not alone in spending heavily on AI, and the question of whether those investments will pay off has hung over markets, with some economists warning of an eventual AI capex bust, though probably not for a few more years.

The contrast with Microsoft, which also reported after the bell and rose in extended trading on accelerating Azure growth and positive free cash flow, underscored how investors are drawing sharp distinctions between big AI spenders.