Alphabet's heavy cloud spending drives bigger-than-expected cash burn

Alphabet's cloud spending increased its cash burn, causing its shares to drop about 8% in extended trading on Wednesday. The tech giant reported negative free cash flow of $9.07 billion, exceeding analyst expectations of breaking even. This marked the first time Alphabet had negative cash flow in its 22-year history as a public company.

The company's ballooning losses were driven by spending on cloud capacity and AI research. Google Cloud's revenue of $30.71 billion in the third quarter more than doubled, but it was not enough to offset the decline in Google's core advertising business, which reported $82.01 billion in revenue, short of analysts' expectations by $1.41 billion.

Despite strong enterprise appetite for cloud-based AI, Alphabet's total revenue for the third quarter fell short of the estimated $128.2 billion. The results highlight Alphabet's role as the primary beneficiary of surging enterprise AI spending, helping ease investor concerns about heavy capital expenditures potentially outpacing near-term revenue gains.