Alphabet's cash flow gap widens as AI costs surge, renewing doubts on monetization

Alphabet reported a second consecutive quarter of negative free cash flow, with the deficit widening to $9.1 billion from $5.9 billion, triggering a 12% stock drop and renewing market concerns about AI monetization. Microsoft and Oracle offered positive outlooks, but Alphabet's Q3 revenue of $127.6 billion and net income of $26.2 billion missed estimates, partly due to an $8.6 billion loss on SpaceX investment. Google Cloud was a bright spot, with revenue up 103% to $30.7 billion. Microsoft's Azure grew 48% to $33.2 billion, beating forecasts, while Oracle expects positive free cash flow by fiscal 2028. Alphabet's search revenue growth slowed to 12% as users shift to AI modes, though its TPU chip business secured $561 billion in backlog orders.