Google is set for a $400 billion stock wipeout after disappointing earnings
Google shares fell 10% in premarket trade. If the fall holds, it will be the biggest negative stock reaction to earnings since it went public in 2004.
Shares in Google's parent company, Alphabet, experienced a significant 10% decline in premarket trading on Thursday following disappointing earnings reports. This drop would represent the largest negative stock reaction to earnings since the company went public in 2004, potentially resulting in a loss of more than $400 billion from Alphabet's market capitalization, which stood at $3.95 trillion on Wednesday.
CEO Sundar Pichai reported that AI search mode had contributed to search queries growing at the fastest year-over-year pace in five years. However, search revenue fell short of expectations, reporting $63 billion, a mere 1% increase from the previous quarter. CEO Pichai acknowledged that monetization in AI Mode was lagging, and announced plans to introduce ads in AI Mode to increase user adoption, including in international markets for the first time.
This financial shortfall, coupled with the rise of generative AI competitors like ChatGPT and Claude, has raised concerns about Google's core business, as the company continues to focus on enhancing search user experience while working towards monetization. Analysts are wary of the potential impact on investor sentiment, with some predicting this could be the company's worst earnings reaction day since its initial public offering in 2004.
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