Closing Time: Wall Street sends Google the bill
Alphabet shares fell 12.6% after the company reported negative free cash flow of $9.07 billion for the third quarter, far worse than the $2.70 billion analysts expected.
Good afternoon. Investors spent Thursday sorting AI companies into two piles: the ones whose spending pays for itself and the ones still burning cash. Alphabet landed in the wrong pile, and two big software names had their worst days ever. Here is what mattered today.
Alphabet shares fell 12.6% after the company reported negative free cash flow of $9.07 billion for the third quarter, far worse than the $2.70 billion analysts expected, CNBC reports.
ServiceNow suffered the biggest drop in its history after its outlook for bookings came in just shy of estimates and failed to calm fears that AI will disrupt its software business, Bloomberg reports. The stock closed down 27.0%.
Fortinet tumbled after reporting slower product revenue growth and cutting its service revenue forecast for the year, and at least 15 brokerages lowered their price targets, according to Reuters, via StreetInsider.
OpenAI rewrote its Model Spec, the public rulebook for how its models should behave, around five values led by faithfulness to human intent.
Wall Street sends Google the bill
For most of this year, investors rewarded tech giants for spending as much as they could on AI data centers. On Thursday they made it clear that the rules have changed. What matters now is whether a company can pay for its buildout out of the cash it already makes.
Alphabet failed that test. The Google parent burned $9.07 billion in free cash flow in the third quarter, more than three times what Wall Street had penciled in, and it kept its full-year capital spending plan at $195 billion to $205 billion. CNBC had noted that any drop beyond 9.77% would be Alphabet’s worst reaction to earnings ever, and the stock blew past that mark to close down 12.6%.
The frustrating part for Alphabet is that the business underneath is growing fast. Google Cloud revenue more than doubled in the quarter, helped by sales of its homegrown AI chips, called TPUs. But selling chips means building them before customers pay, and finance chief Anat Ashkenazi said unsold TPU systems will now show up as inventory that drains cash, as Investing.com reports from Reuters.
Microsoft offered the contrast investors wanted. It spent $45.2 billion on capital projects, below the $50.67 billion analysts expected, while free cash flow stayed positive at $18.63 billion and its Azure cloud business grew 48%. Even so, CNBC reports that Microsoft trimmed its spending forecast for the year to $170 billion from $175 billion because some outside GPU suppliers are running late, pushing that capacity into the first half of 2027. Its shares ended roughly flat.
The lesson for anyone watching the AI trade is that big spending is no longer a reason to cheer by itself. Amazon reports after the bell today, and its shares slipped 4.2% ahead of the numbers, so investors will be looking closely at how much cash it has left after paying for its own data centers.
Elsewhere in AI today
ServiceNow’s rough day came even as it raised its full-year subscription revenue outlook and reported a 65% jump in new AI contract value. Investors focused instead on bookings growth of a bit more than 18% for the current quarter, which Bloomberg says fell just short of the 19% analysts wanted. The selloff dragged other software names lower, including Atlassian.
The same company just deepened its ties with OpenAI. A new ServiceNow plugin lets ChatGPT users look up incidents, check the risk of a change and update records without leaving the chat, and OpenAI says ServiceNow plans to give all its employees ChatGPT Work and Codex. Security and voice features are due in 2027.
Marvell fell 13.2% after Bloomberg reported that the chipmaker is in advanced talks to buy Lumentum, a maker of optical parts for AI data centers. With Lumentum worth about $83 billion and Marvell holding about $3.93 billion in cash, a deal would likely be paid in stock and dilute current shareholders, The Motley Fool explains.
OpenAI says faithfulness to human intent is now the foundation of its updated Model Spec, meaning its models should understand what people actually want rather than follow instructions to the letter. The company admits its current models do not yet fully live up to the new version and says it is working on training methods to close the gap.
Markets
Tech stocks fell on Thursday as earnings from Alphabet, ServiceNow and Fortinet weighed on the group. The Nasdaq dropped 1.4%, the S&P 500 slipped 0.3% and the Dow lost 0.2%. The Philadelphia semiconductor index fell 1.4%. Of the 86 AI and tech stocks we track, only 32 closed higher.
The gainers were a scattered group. Defense AI company BigBear.ai rose 8.5%, and drone maker AeroVironment climbed 7.1%. Chipmaker NXP gained 5.7%, chip-inspection equipment maker KLA added 5.5% and power producer Constellation Energy rose 2.5%.
Software and chips led the losers. ServiceNow plunged 27.0% and Fortinet sank 20.1% after their results. Marvell dropped 13.2% on the Lumentum report, Alphabet fell 12.6% on its cash burn and Atlassian slid 7.3% in the software selloff.
Biggest winners
| Ticker | Name | Price | Day |
|---|---|---|---|
| BBAI | BigBear.ai | 2.67 | +8.54% |
| AVAV | AeroVironment | 134.88 | +7.09% |
| NXPI | NXP | 266.00 | +5.69% |
| KLAC | KLA | 167.43 | +5.45% |
| CEG | Constellation Energy | 264.58 | +2.52% |
Biggest losers
| Ticker | Name | Price | Day |
|---|---|---|---|
| NOW | ServiceNow | 109.65 | -26.96% |
| FTNT | Fortinet | 139.10 | -20.09% |
| MRVL | Marvell | 218.34 | -13.24% |
| GOOGL | Alphabet | 283.82 | -12.64% |
| TEAM | Atlassian | 204.10 | -7.28% |
Prices are Thursday’s U.S. closing prices, October 29, 2026, versus Wednesday’s close. Market data is a snapshot, not live.
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