Alphabet has its biggest one-day fall since 2004 as AI spending pushes free cash flow below zero

Alphabet shares fell 12.6% on 29 October 2026 to close at $283.82, its biggest one-day fall since it listed in 2004.¹² The drop wiped out about $475 billion of market value, by Yahoo Finance's count cited by TOPONE Markets.²

Sales came in close to forecasts. What worried investors was the cost of building AI capacity.

Cloud grew 103%, and cash flow turned negative

Google Cloud revenue rose 103% to $30.7 billion in the third quarter, ahead of the $28.7 billion analysts expected.¹² Search and other revenue grew 12% to $63.3 billion.¹² Total revenue was $127.6 billion, slightly below estimates.¹²

Capital spending, mostly on AI infrastructure, reached $51.4 billion for the quarter.¹² That left free cash flow at minus $9.1 billion.¹² Over the last twelve months, free cash flow fell to $19.7 billion from $73.3 billion in 2025, TOPONE Markets reports.² Trefis put it simply: "Free cash flow is the measure to watch."¹

Earnings per share came in at $2.12 against an estimate of $3.02, though TOPONE Markets notes an $8.2 billion loss mainly tied to the SpaceX stake weighed on that figure.¹²

More spending ahead

Alphabet kept its 2026 capital spending guidance at $195 billion to $205 billion and said spending will "increase significantly" in 2027.¹² With $132 billion spent in the first nine months, that implies $63 billion to $73 billion in the fourth quarter alone.²

Google Cloud's backlog stands at $560.8 billion, according to TOPONE Markets.² That's the strongest argument on Alphabet's side: customers have signed up for far more than the company can currently deliver.

Microsoft reported a calmer quarter the day before

Microsoft's results on 28 October offered a contrast. Azure revenue grew more than 48% to $33.17 billion, and capital spending of $45.2 billion came in below some analysts' projections, SiliconANGLE reports.³ Microsoft's free cash flow fell 27% to $18.63 billion but stayed positive, and its shares rose about 4% after hours.³ "We still have demand that exceeds supply," finance chief Amy Hood said.³

Both companies report demand running ahead of capacity. Investors rewarded the one whose cash flow stayed above zero.

What it means for AI customers

For businesses buying cloud AI services, including the many Indian startups on Google Cloud, this spending is what keeps capacity coming. A cloud provider that pulls back on building would mean longer waits for GPUs and TPUs. The market's message is about patience with returns, not about demand. This is not investment advice.

What to watch

• Alphabet's fourth-quarter capital spending and whether free cash flow turns positive.
• How 2027 spending plans compare when Alphabet gives figures.

Related: Google open-sources TorchTPU and OpenAI trims its funding target.