Alphabet shares plunge 10% as search ad revenue drops and AI costs mount

Alphabet shares plunged 10% after reporting disappointing search advertising results and a massive cash burn from AI investments, with free cash flow turning negative for the first time in 22 years. Google Cloud revenue more than doubled, but investors focused on the $9.1 billion negative free cash flow, missing analyst expectations, and a $1.4 billion decline in search ad revenue. Total revenue of $127.6 billion fell short of estimates, and adjusted earnings per share of $2.67 missed the $3.02 forecast. The company plans significant capital expenditure increases for 2027, following this year's projected $195-205 billion spending. Net income dropped 25% to $26.17 billion, reflecting concerns about AI costs and competitive pressure on the core search business.