Alphabet shares plunge 10% as Google's AI search ads slow

Alphabet shares fell over 10% after Google reported slowing search ad growth and lower revenue per AI-driven query, with quarterly capital expenditures exceeding $51 billion. Cloud gains failed to offset investor concerns about AI investment profitability. Revenue reached $127.6 billion, up 25% year-over-year, but earnings per share of $2.12 missed analyst estimates of $3.01. Net income dropped to $26.2 billion, partly due to an $8.7 billion write-down. Search revenue growth slowed to 12% from 17% in the prior quarter. Google's AI Mode generates less ad revenue than traditional search, according to commercial director Philipp Schindler. The company maintained its $195-205 billion annual capex forecast and expects further increases in 2027. Free cash flow was negative at -$9.1 billion, while cloud revenue more than doubled to $30.71 billion.