Artificial intelligence clips the giant's wings. Huge drop in Google's value

Alphabet, Google's parent company, published financial results that caused a real storm on the stock exchange. Even though the company's revenues increased by 25%. year-on-year, reaching USD 127.6 billion, profits in this quarter decreased by 25%. For the second time in history, Alphabet reported negative free cash flow - this time exceeding $9 billion. This is almost twice as much as the quarter before.

Free cash flow is the money a company retains after paying operating expenses and investments. This means Alphabet is now spending more money than it earns.

The problem is caused by the implementation of AI-based summaries in Google Search. New AI solutions, although innovative, have made users less likely to click on ads, which constitute the lion's share of the company's revenue. Effect? The value of Alphabet's shares fell to its lowest level in half a year, and the company's market capitalization decreased by $500 billion - from $3.97 to $3.46 trillion.

Amazon and Microsoft are also not impressive

It's not just Google that has reasons to be concerned. Amazon also disappointed investors - despite an 11% quarterly increase in sales to $201 billion, the company reported record cash flow of minus $42 billion. CEO Andy Jassy argues that investments in AI and the production of own chips will bring trillions in profits in the future, but the market remains skeptical. Amazon shares fell 6%. in post-session quotations.

Microsoft, although it also invests billions in artificial intelligence and is one of the main shareholders of OpenAI, recorded a smaller decline in the value of its shares - below 1%. The company boasted a 19 percent increase in revenue and a 30 percent increase in its cloud business. CEO Satya Nadella emphasizes that AI tools such as Copilot are breaking records in popularity, but investors expect concrete evidence that artificial intelligence will translate into real profits.

Investors are waiting for a breakthrough

Experts emphasize that the technology industry faces a huge challenge today. On the one hand, companies must invest billions in the development of AI, on the other hand, they cannot afford to weaken traditional sources of revenue. Forrester's Tracy Woo notes that Alphabet and other giants must strike a balance between innovation and financial stability.