Alphabet Has Its Worst Day as a Public Company, but Most Stocks Rise

Alphabet fell 12.6%, its worst day since it went public in 2004

Alphabet's Class A shares fell 12.64% to $283.82 on Thursday, the biggest one-day percentage drop since the company listed in August 2004. The previous worst was an 11.63% fall on March 16, 2020. The Class C shares fell 12.29%. It was the stock's lowest close since March 30.

The drop erased about half a trillion dollars of market value. It was not the largest one-day loss of value on record: Nvidia's loss of about $593 billion on Jan. 27, 2025, still stands.

What disappointed

Alphabet reported its third quarter on Wednesday after the close:

• Revenue of $127.58 billion, just short of the $128.22 billion analysts expected (LSEG).
• Search revenue of $63.35 billion, against $64.96 billion expected.
• Negative free cash flow of $9.07 billion, as purchases of property and equipment topped $51 billion in the quarter.
• A full-year capital spending forecast kept at $195 billion to $205 billion.

Not everything missed. Google Cloud revenue grew 103%. Reported earnings also included an other-income loss on Alphabet's stakes in AI labs and SpaceX.

The reaction centered on the question hanging over the whole AI trade: whether the huge investments in AI will pay off. Pivotal Research CEO Jeffrey Wlodarczak put the bear case this way:

"The bears will argue this is the first quarter that AI is starting to seriously hurt their search business"

What it could mean

If investors read the quarter as the first real sign that AI answers are eating into search advertising, pressure could stay on Alphabet and spread to other companies that are spending heavily on AI with little cash coming back yet. If the next quarters show search holding up while Cloud keeps growing this fast, a drop this large has at times left room for a sharp recovery.

Is this the moment AI started to hurt Google's search business, or a reset in expectations for a company still growing?

Gene Munster said it would get worse before it got better. On Thursday it did

On Wednesday evening, with Alphabet already down about 9% in after-hours trading, Gene Munster, managing partner at Deepwater Asset Management, told CNBC:

"I think it is likely going to get worse before it gets better."

On Thursday the stock closed down 12.64%.

The bears

On CNBC's "Halftime Report" on Thursday, Jim Lebenthal of Cerity Partners said he was trimming Alphabet further, to about three and a half percent of his portfolio, below its weight of about five and a half percent in the S&P 500. He told the show:

"I just don't think the negative narrative is going to change anytime soon."

He also said he could see ways to fix search and pointed to Google Cloud's growth, but said he does not expect the stock to go anywhere for the next couple of quarters.

The patient camp

Not everyone ran. CFRA's Angelo Zino told Yahoo Finance the pullback "probably represents a buying opportunity."

Citigroup strategist Scott Chronert, in a note late Wednesday, kept his 8,100 year-end target for the S&P 500: "All in, we continue to see a path higher for the S & P 500 into year end," he wrote.

Retail

Individual investors leaned the other way from the sellers. Stocktwits said sentiment on Alphabet among its users "remained in the 'extremely bullish' territory amid high user message volume" despite the drop.

What it could mean

When professionals cut and individual investors buy the dip, the outcome has often depended on what comes next: steady news could let the bulls be proven right and set up a rebound, while another disappointment could force more selling from holders who bought on the way down.

Who reads Alphabet better right now: the fund managers trimming, or the buyers stepping in?

The S&P 500 fell 0.3%, but 406 of its 503 stocks rose

The headline numbers said stocks fell. Most stocks did not.

The S&P 500 slipped 0.30% and the Nasdaq Composite fell 1.38%. Inside the S&P 500, though, 406 stocks rose and only 97 fell, about four to one. The median stock gained 1.46%, and the equal-weight S&P 500 fund (RSP) rose 1.19%. The Russell 2000 index of small companies gained 1.01%, its fourth straight gain.

The split comes from how the index is built. The S&P 500 weights each company by its market value, so a handful of giants can outweigh hundreds of smaller gains. On Thursday those giants were Alphabet and other AI names. AP put it plainly in its closing story:

"If not for Alphabet's drop, the S&P 500 would have been higher for the day."

How unusual it was

• The median stock rose in every sector of the S&P 500 except information technology, where it fell 0.35%.
• Nine of the 11 Select Sector SPDR funds rose. Only communication services (-1.87%) and technology (-1.18%) fell.
• The equal-weight fund beat the SPDR S&P 500 ETF (SPY) by 1.58 percentage points. In daily closing data back to 2003, a day with SPY down and RSP up as much as on Thursday had happened only twice before: April 28, 2020, and July 11, 2024.

Art Hogan, chief market strategist at B. Riley Wealth Management, described a market that is choosing more carefully: "I think investors are becoming much more selective."

What it could mean

A market where most stocks rise while the biggest names fall can be read two ways. It may be healthy rotation, with money spreading beyond a few giants, which has often supported a broader advance. Or it may be a sign that the leaders that carried the index this year are losing their pull, which could weigh on the index even while the average stock holds up.

Is this broadening a strength for the market, or a warning about its leaders?

ServiceNow had its worst day ever, Fortinet fell 20%, and Caterpillar dropped 9% despite a beat

The worry about AI spending reached other companies tied to it.

Software

ServiceNow fell 26.97% to $109.64, its worst day since its June 2012 public debut; the previous worst was a 17.75% drop on April 23, 2026. It was the stock's fourth straight loss. Third-quarter adjusted earnings were $1.00 a share, two cents short of the $1.02 expected (LSEG). Its fourth-quarter subscription revenue forecast of $4.245 billion to $4.255 billion compared with the $4.25 billion analysts expected (FactSet), and current remaining performance obligations, revenue it expects in the coming months, are projected to grow 18.5%, below analysts' expectations. Oppenheimer's Brian Schwartz kept a Buy rating and a $165 target: "In our view, ServiceNow's AI momentum counters a disruption thesis, although it doesn't establish a clear path to organic reacceleration," he wrote.

Fortinet fell 20.09% to $139.10, its worst day since Aug. 7, 2025. Its third quarter beat estimates, but it cut its full-year service revenue forecast to $5.15 billion to $5.17 billion, from $5.18 billion to $5.22 billion. Adjusted gross margin was 79.6%, against 80.1% expected (LSEG). BofA cut the stock to Neutral with a $140 target. The iShares software fund (IGV) fell 3.49%.

Caterpillar

Caterpillar fell 9.27% to $647.24, its worst day since March 9, 2020, even though it beat: adjusted earnings of $7.20 a share against $7.08 expected, and revenue of $20.68 billion against $20.55 billion (LSEG). Construction sales came in slightly below estimates, it kept its annual sales forecast and guided to "moderate" fourth-quarter sales growth, and its backlog reached a record of about $78 billion. The company sells power-generation equipment to data centers, and reports pointed to worries about rising data center costs, project delays and growing political opposition to new facilities.

Chips

• Marvell fell 13.24% after Bloomberg reported that it is in talks to buy Lumentum; neither company has confirmed it.
• Other chip and AI cloud stocks also fell: Teradyne 5.43%, Sandisk 5.32% ahead of its results, Nebius 5.68% and CoreWeave 4.99%.
• Micron fell 4.98%; no company news was reported.
• The VanEck Semiconductor ETF (SMH) fell 1.06%; Nvidia slipped 0.80%. Microsoft ended about flat (-0.16%).

What it could mean

If investors keep punishing anything tied to the AI build-out, even on good results, the pressure could spread to more suppliers of chips, power and data center equipment. On the other hand, sell-offs that hit strong and weak reports alike have at times left the strongest companies priced for a recovery once the fear fades.

When a company beats estimates and still falls 9%, is the market pricing in a slowdown that has not shown up in the numbers yet?

Health care led the market as Eli Lilly jumped 6.6% to a record on a raised forecast

While money left the AI names, investors rotated into defensive sectors such as health care, financials and real estate, which kept a lid on the index losses.

The Health Care Select Sector SPDR fund (XLV) rose 2.40% to a record close, the best of the 11 sector funds. The S&P 500 health care sector hit an all-time high in early trading. Real estate (XLRE) gained 2.21%, consumer staples 1.54%, utilities 1.53% and financials 1.39%.

Eli Lilly

Eli Lilly rose 6.57% to a record close of $1,372.99. Third-quarter revenue was $24.4 billion, against $22.61 billion expected, and adjusted earnings were $7.48 a share, against $6.26 (LSEG). The company raised its 2026 revenue forecast to $91 billion to $92 billion, from $85 billion to $87 billion.

"Lilly had another strong quarter, exceeding our prior expectations and allowing us to raise our full-year outlook,"

said David Ricks, Lilly's chair and CEO, in the company's release.

Other gainers on results and deals

• Merck rose 3.85% and Mastercard 4.18%, to a record close, after both beat estimates.
• DoorDash rose 5.61% after agreeing to buy Instacart for $65 a share, about $17 billion, and beating estimates for its own quarter. Instacart fell 2.24%. "Grocery is one of the hardest things to get right online," DoorDash CEO Tony Xu said.

What it could mean

A move into health care, staples and utilities is often read as caution: investors keeping money in stocks while stepping away from the most crowded trades. If it continues, defensive sectors could keep outperforming while technology lags. If the AI worry eases, the same money could flow back just as quickly, leaving the defensives behind.

Is the move into health care a lasting change in leadership, or a place to wait out the AI storm?

The economy grew 3.4% last quarter, inflation picked up to 3.6%, and markets lean toward a December hike

Thursday's economic reports showed a strong economy and inflation that is not going away.

• Third-quarter GDP grew at a 3.4% annual rate in the government's first estimate, above the 3.1% economists expected and up from 2.2% in the second quarter. Consumer spending rose 3.8%. Gross private domestic investment jumped 19.4%, with equipment spending up 20.9%.
• The PCE price index rose 0.5% in September and 3.6% from a year earlier, up from 3.4% in August. The monthly rise was in line with estimates and the largest since March; the annual rate came in just below estimates. Core PCE rose 0.3% on the month and 3.1% on the year, in line.
• Initial jobless claims fell to 194,000, below the 200,000 expected.

"Net, net, economic growth is powering ahead despite the uncertainty of geopolitical risks and the damage posed to many sectors of the economy by higher energy costs,"

said Chris Rupkey, chief economist at Fwdbonds.

The Fed

The Federal Reserve held its key rate at 3.75% to 4% on Wednesday, after a hike in September. Two officials dissented in favor of a hike. On Thursday, markets priced in an 83% chance of a quarter-point hike in December, according to the CME FedWatch tool; that is a market probability, not a Fed decision.

Even so, Treasury yields eased, and the 10-year yield slipped just under 5%. Ali Hassan, a portfolio manager at Thornburg Investment Management, said in a note on Wednesday: "The market trimmed hikes further out: it still expects a December move but is less convinced of the follow-through."

What it could mean

A fast-growing economy can support company profits, but with inflation at 3.6% it also keeps pressure on the Fed to raise rates again, which could weigh on growth stocks. If inflation cools in the coming months, the hikes markets now expect could be trimmed, which has often helped both bonds and stocks.

Will this economy keep the Fed hiking, or is the market right to doubt the hikes after December?

After the bell, Amazon fell more than 10% at one point and Intel more than 20%

The AI-spending question carried past the close. Both companies reported after the bell, and both stocks fell sharply in extended trading before trimming their losses. These were early moves and can change before Friday's open.

Amazon

Amazon fell more than 10% at one point after its results. In the regular session it had already fallen 4.25% to $243.79, its lowest close since July 30.

• Earnings of $1.89 a share, against $1.96 expected, and revenue of $201.94 billion, against $202.31 billion (LSEG).
• AWS revenue of $45.98 billion beat the $45.29 billion expected (StreetAccount), and grew 39.3%, its fastest growth in nearly five years.
• Advertising revenue of $19.64 billion missed the $20.82 billion expected (StreetAccount).
• Amazon said it continues to expect 2026 cash capital spending of about $220 billion, unchanged.
• Free cash flow over the past 12 months was an outflow of $42.4 billion, against an inflow of $14.8 billion a year earlier.
• Operating margin was 13.9%, Amazon's highest ever, and it guided fourth-quarter revenue to $240 billion to $247 billion.

"There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years."

said CEO Andy Jassy in the release.

Intel

Intel fell more than 20% at one point, after slipping 3.62% to $92.07 in the regular session. It beat for the third quarter, with adjusted earnings of 52 cents a share against 40 cents and revenue of $16.51 billion against $16.5 billion (LSEG). The forecast disappointed: fourth-quarter revenue of $15 billion to $16 billion and adjusted earnings of 25 cents, against $17.1 billion and 43 cents expected. Data center and AI revenue rose 78% to $7.3 billion, while client computing fell 5%.

"We see the PC slowdown continuing at least through the first half of next year, but we remain optimistic about the opportunities across our broader portfolio,"

said Intel finance chief David Zinsner in the release.

Sandisk also reported: fiscal first-quarter revenue of $11.0 billion, up 23% from the prior quarter, and an eight-for-one stock split effective Nov. 19.

What it could mean

Amazon gave both sides of the argument: cloud growth is speeding up, but so is the cash going into AI. If investors focus on AWS, Friday could bring a recovery from the first after-hours drop; if they focus on the cash burn, the pressure on AI spenders that began with Alphabet could deepen. Intel's warning on PCs may weigh on chip stocks tied to consumer devices more than on those tied to data centers.

After Alphabet and Amazon, will investors keep paying for AI growth that costs this much cash?

Carvana, ADT, Glaukos and Crocs jumped on results and deals; Sprouts sank after a cut

Away from AI, results and deals moved a long list of stocks.

Up

• ADT rose 33.27% after agreeing to be bought by Thrive Holdings for $10 a share in cash, a $15.3 billion deal including debt.
• Glaukos rose 33.43% to a record close after third-quarter revenue of $211 million, against $168 million expected (FactSet).
• Crocs rose 25.54%, its best day since April 2020, after beating estimates and raising its guidance.
• Carvana rose 15.55% after a record quarter: revenue up 42.4% to $8.04 billion. The SEC also closed an investigation into the company with no action.
• Norwegian Cruise Line rose 13.33% after beating on both earnings and revenue.
• Textron rose 11.77% after earnings of $1.76 a share beat the $1.43 expected (FactSet) and it raised its outlook.
• Chipotle rose 8.86% as same-store sales grew 2.1%, against 1.5% expected.

Down

• Sprouts Farmers Market fell 22.58%, its fifth straight loss, after missing estimates and cutting its outlook.
• Honeywell Aerospace fell 9.6%, even as it raised its full-year outlook and set an initial dividend of 40 cents.

Big moves with no reason reported

• Gen Digital rose 15.81%, the S&P 500's top gainer.
• Huntington Ingalls rose 13.32%.
• Alnylam fell 25.13%, the Nasdaq-100's worst.

What it could mean

Big moves on company results, up and down, suggest investors are judging each report on its own rather than buying or selling whole groups. That can make earnings season more rewarding for careful stock pickers, but it also means a single miss can be punished harshly, as Sprouts found.

In a market this selective, do company results matter more now than the AI headlines?

The close: the S&P 500 snapped a three-day winning streak, the Nasdaq fell 1.4%, small caps rose

• S&P 500: 7,720.39, down 23.59 points, or 0.30%, its first loss in four days. It is 1.26% below its Oct. 6 record close of 7,818.93.
• Dow Jones Industrial Average: 52,342.56, down 132.54 points, or 0.25%.
• Nasdaq Composite: 26,184.72, down 365.13 points, or 1.38%, its worst day since Oct. 22. It is 5.13% below its Oct. 6 record. The Nasdaq-100 also fell 1.38%.
• Russell 2000: 2,859.22, up 1.01%, its fourth straight gain.
• VIX: 17.20, up 0.29 points; the market's fear gauge barely moved.

The day's shape

There was no late-day collapse or rally. The SPDR S&P 500 ETF (SPY) stayed in a narrow range all day, about 0.5% from high to low, and the Nasdaq-100 fund (QQQ) ended near the middle of its range.

Rates, oil, gold, bitcoin

• The 10-year Treasury yield slipped just under 5%.
• U.S. crude erased an early drop and ended about flat, near $103 a barrel, after trading as low as $99.79. The early drop came as The Wall Street Journal reported that Vice President JD Vance had reached out to Mohsen Rezaei, secretary of Iran's top security body.
• Gold for December delivery fell 0.37% to $4,036.70 an ounce; silver fell 2.24%.
• Bitcoin traded near $80,000.
• The dollar index fell 0.26% to 101.92.

Elsewhere

• Apple rose 1.48% to a record close and Meta gained 1.96%, with no company news reported for either.
• CNN's Fear & Greed Index read 34.6 at the close, in "fear," little changed from 35.9 a day earlier.
• In Europe, the ECB held rates, and Christine Lagarde said she will resign as its president in February, nine months before the end of her term.

What it could mean

Small caps rising for a fourth day while the Nasdaq fell, with the fear gauge calm, could point to a market rotating rather than retreating; that kind of breadth has often cushioned pullbacks in the big indexes. But with Amazon and Intel falling after the bell, Friday may test whether the selling in the largest AI names stays contained.

Does Friday's open belong to the giants' after-hours losses, or to the 406 stocks that rose?