Google's AI search just cost it $500 billion in a day

Alphabet fell 13% in its worst day ever, losing over $500B after a Q3 earnings miss.

According to CNBC, shares dropped 13% on Thursday, passing the previous record drop of 11.63% set in March 2020. BBC News reports market value fell to $3.46 trillion from $3.97 trillion.

The Guardian reports net profit slid 25% to $26.2B, well short of expectations, while revenue rose to $127.6B. Search and other revenue grew 12% to $63.35B and missed estimates; growth was 19% in Q1 and 17% in Q2, per CNBC.

Chief business officer Philipp Schindler said the search impact was partly due to lower monetization within AI Mode. Per The Register, Google is expanding AI Overview ads and adding multiturn ads in the US for AI Mode queries. Google also said Search query growth was the highest in five years, and Cloud revenue more than doubled to nearly $31B.

Watch next: Alphabet kept its $195B to $205B full-year capex guidance, after reporting negative free cash flow of $9.07B for Q3.

“the lower monetization we were seeing in AI Mode.”Philipp Schindler, Google chief business officer

The facts we checked

According to CNBC, BBC News, The Guardian and The Register

1. Alphabet shares fell 13% on Thursday, its worst day ever, passing the previous record drop of 11.63% set in March 2020.Fact · CNBC
2. Alphabet lost just over $500bn in value; total market value fell to $3.46 trillion from $3.97 trillion the day before.Figure · BBC News
3. BBC describes the share fall as 'over 12%', to a six-month low.Reported · BBC News
4. Net profit slid 25% from a year earlier to $26.2bn, well short of expectations, while revenue rose to $127.6bn.Figure · The Guardian
5. Search and other revenue grew 12% to $63.35 billion in the September quarter but missed analyst expectations.Figure · CNBC
6. Search revenue growth slowed from 19% in Q1 to 17% in Q2 to 12% in Q3.Figure · CNBC
7. Chief business officer Philipp Schindler said the impact on search was partly due to lower monetization within AI Mode.Reported · CNBC
8. Asked on the call about the slowdown, Schindler cited foreign exchange rates, Europe's elimination of its customs-duty exemption, and 'the lower monetization we were seeing in AI Mode.'Quote · The Register
9. Google said it is expanding distribution of AI Overview ads and adding multiturn ads in the US for AI Mode queries.Reported · The Register
10. Alphabet reported negative free cash flow of $9.07 billion for Q3, against the $2.7 billion analysts expected.Figure · CNBC
11. Alphabet maintained its full-year capital expenditure guidance of $195 billion to $205 billion; Q3 capex was $51.4 billion.Figure · CNBC and The Register
12. Google said year-over-year Search query growth was the highest in the last five years in Q3.Reported · CNBC and The Register
13. Google Cloud revenue more than doubled in the quarter to nearly $31 billion.Figure · CNBC

Sources

• BBC NewsGoogle value plunges by $500bn as its own AI search hits ad sales
• The RegisterGoogle's search revenue Ferrari hits an AI-powered speed bump
• CNBCAlphabet earnings miss reflects first real sign that AI is taking a bite out of search
• CNBCAlphabet tanks nearly 13% for worst day ever, losing $500 billion in value
• 9to5GoogleGoogle stock drops amid AI fears; AI Mode has ‘lower monetization,’ getting more ads
• The GuardianGoogle owner Alphabet loses $500bn in market value after profit disappoints Wall Street