Alphabet Shares Plunge 13%, Wiping Out $500 Billion in a Day

Alphabet stock fell almost 13% on Thursday, erasing roughly $500 billion in market value. It is the worst single-day drop for Google's parent company since its 2004 listing. The previous record was 11.63%, set in March 2020.

The sell-off came a day after a strong headline report: quarterly revenue rose 25% to $127.6 billion, helped by a cloud business that doubled in a year. The concern lies in search, which generates nearly half of group revenue. Search revenue grew 12% in the third quarter to $63.35 billion, below analyst expectations for the second quarter in a row. The two prior quarters showed growth of 19% and 17%.

AI Mode earns less per answer

Asked about the slowdown, Google chief business officer Philipp Schindler first cited currency effects. He then acknowledged that strong growth in AI Mode queries had weighed on results "because of the lower monetization we saw there." Users are asking Google more questions than ever, with query growth at its fastest pace in five years, but an AI-generated answer earns less than a page of traditional links.

Costs add to the pressure. Alphabet expects to spend between $195 billion and $205 billion on data centers this year, and free cash flow was negative $9.07 billion in the quarter.

Publishers feel the effect too

Google is not the only one affected. Reddit said it will end logged-out browsing, with tests of member-only access starting this quarter outside the United States. The company says it lost more than 1 million search referrals per week in October and warns daily traffic could drop about 10% by year-end. CEO Steve Huffman said Google "really changed its relationship with the rest of the internet."

Google's answer is advertising. It is extending ads to AI Overviews and AI Mode, and bringing AI Mode ads to ten more countries, including Brazil, Mexico and the United Kingdom. Schindler described these as queries made "upstream of purchase," carrying new and high-value commercial intent. Investors will now watch whether those ads can close the gap between AI Mode traffic and the revenue it produces.