Alphabet shares fell 12.6% on Thursday in their worst single-day performance since the company began trading in 2004, wiping about $482 billion (£?) from its market value as investors reacted to slowing growth in Google’s search business.
Class A shares closed at $283.82, exceeding the previous record daily fall of 11.6% recorded in March 2020. The sell-off left Alphabet’s overall valuation at roughly 19 times expected earnings, according to Bank of America, while its core search operation was valued at about 10 times earnings.
That compares with 18.7 times forward earnings for the S&P 500 and 13 times for the energy sector, the cheapest part of the market.
Google’s search and other revenue increased by 12% to $63.35 billion in the third quarter, missing analysts’ forecast of 15% growth. The rate had been 17% in the second quarter and 19% in the first.
The figures raised concern that the rapid spread of generative artificial intelligence is beginning to affect the business that has financed Alphabet’s wider ambitions. Bank of America analyst Justin Post said the “slowdown in high-margin search growth” justified reducing his price target from $430 to $380, although he kept a Buy rating.
“Search AI transition will fuel the bears,” Mr Post and co-author Nitin Bansal wrote.
AI summaries put pressure on search
The slowdown came despite Google reporting that search activity was rising. Sundar Pichai, Alphabet’s chief executive, said: “Our year-over-year query growth rate is the highest it’s been in the last 5 years.”
Bank of America estimated that search growth, excluding currency movements, had slowed by three percentage points from the previous quarter. It said Google had indicated that traffic moving to AI Overviews — summaries generated at the top of search results — had been a small headwind, with the effect likely to be greater internationally as advertising begins to expand.
Google’s chief business officer, Philipp Schindler, said the company was increasing the number of adverts shown within AI Overviews and AI Mode. “This includes taking our monetization footprint global for the first time,” he said.
A study by the Pew Research Center published in July 2025 found that users shown an AI summary clicked a traditional search result on about 8% of visits, compared with 15% when no summary appeared. The research measured clicks to websites rather than Google’s advertising revenue.
Cloud growth comes with rising spending
Alphabet’s cloud division provided a counterpoint to the search slowdown. Google Cloud revenue more than doubled to $30.71 billion, while its operating margin rose to 36.2% from 23.7% a year earlier.
But Alphabet spent $51.4 billion on capital expenditure during the quarter, more than twice the amount a year earlier, and recorded negative free cash flow of $9.1 billion.
The company indicated that capital spending could reach $200 billion in 2026 and rise to $300 billion in 2027. Its finance chief, Anat Ashkenazi, said in July that expenditure was expected to “increase significantly in 2027”.
Bank of America has also begun including potential sales of Alphabet’s in-house artificial intelligence chips, known as TPUs, to outside customers. It estimates those sales could reach $75 billion in 2027.
The quarter included a one-off $8.7 billion mark-to-market loss on Alphabet’s stake in SpaceX, which Bank of America said reduced earnings by 55 cents a share. Forbes estimates that Alphabet co-founders Larry Page and Sergey Brin lost a combined $60 billion on paper as the shares fell.
Bank of America’s more positive outlook rests largely on a potential improvement in the second half of 2027, after tougher comparisons ease. The bank said international advertising within AI Overviews could help produce an upturn as early as the first quarter of that year.
It did not include early-stage investments such as Waymo and quantum computing in its valuation, describing them as “meaningful long-term optionality”.
