Alphabet Heads for Record Post-Earnings Drop as Free Cash Flow Turns Negative

Alphabet stock fell about 10% in premarket trading on Thursday after its third-quarter results, while Microsoft gained nearly 4%. If Alphabet closes more than 9.77% lower, it would be the biggest post-earnings drop since the company went public in 2004. Investors are paying close attention to how much big tech is spending on AI and what returns that spending brings.

Why Alphabet’s Free Cash Flow Worried Investors

The Google parent posted negative free cash flow of $9.07 billion for the quarter, far worse than the $2.70 billion analysts expected. At the same time, it kept its full year capital expenditure guidance at $195 billion to $205 billion, so the heavy spending plan stays in place.

Microsoft Spending Comes in Below Forecasts

Microsoft reported $45.2 billion in capital expenditures and finance leases, up 30% from a year earlier but under the $50.67 billion analysts projected. Free cash flow dropped 27% to $18.63 billion, yet stayed positive.