Alphabet shares tumbled nearly 10% in premarket trading on Thursday, putting the company on track for its largest-ever post-earnings drop. The decline came as investors reacted to the tech giant's third-quarter earnings, which revealed negative free cash flow of $9.07 billion, far worse than the $2.70 billion analysts had anticipated. Alphabet also maintained its full-year capital expenditure guidance between $195 billion and $205 billion, raising concerns about its spending plans.
In contrast, Microsoft shares rose nearly 4% in premarket trade after reporting $45.2 billion in capital expenditures and finance leases for the third quarter. While this was 30% higher than a year ago, it fell short of analyst projections of $50.67 billion. Microsoft's free cash flow dropped 27% to $18.63 billion but remained positive.
Investors are closely watching how tech companies are managing their AI spending and the returns on those investments. Ben Barringer, global head of technology research at Quilter Cheviot, noted that Microsoft's approach was more measured, while Alphabet's earnings call was described as 'poorly handled,' contributing to the share price drop.
Nasdaq-100 futures also fell more than 1% early Thursday, reflecting broader market concerns about tech sector performance.