Alphabet shares fell sharply in premarket trading following an earnings report that marked the company's first double miss for both earnings per share and revenue since Q4 2022. Investors expressed concern over the impact of AI chat and agents on Google's Search volumes, a high-margin area critical to Alphabet's funding power. Separately, Microsoft announced a reduced capital expenditure forecast for the year, citing delays in third-party graphics processing unit capacity until the first half of 2027.
Microsoft's CFO, Amy Hood, noted that the capex guidance fell to $170 billion for the full year, down from an earlier estimate of $175 billion. Alphabet's finance chief, Anat Ashkenazi, told analysts that outside computing power "came online only at the very end of Q3," and the company reported negative free cash flow exceeding $9 billion. In contrast, Microsoft's Azure cloud business grew 48%, and the company's group capex guidance adjustment was welcomed by some investors.
Other tech stocks reacted to these reports; Coreweave, Nebius, and IREN shares all dropped in premarket trading. Analysts noted that the "Magnificent Seven" no longer trades as a monolith, requiring investors to be more discerning. Amazon is scheduled to report results after the close, with analysts expecting another quarter of negative free cash flow against capex of $5.8 billion.
