Alphabet's stock price plummeted more than 9% in a single day, wiping out approximately $160 billion in market capitalization. This was due to confirmed concerns over weakness in the cloud computing sector despite better-than-expected third-quarter revenue growth. As fellow tech companies like Apple and Amazon also tumbled simultaneously, the tech-heavy Nasdaq index recorded its largest drop since February.
On the 25th (local time) in the New York stock market, Alphabet's stock closed at $125.61 per share, down 9.51% from the previous session. This is the largest single-day drop since March 2020 during the pandemic. It is estimated that more than $166 billion in market capitalization vanished in one day. Market Insider reported that this represents the largest loss by market cap in history. The previous record was on October 26, 2022, when $137.5 billion evaporated.
The sharp decline in Alphabet's stock price on this day was a result of investor disappointment confirmed in the cloud segment, which will heavily influence the company's future earnings outlook. Alphabet's third-quarter revenue and net income, released after market close the previous day, far exceeded Wall Street's expectations. However, the segment that investors focused on was the cloud business. Cloud revenue grew 22.5% year-over-year to $8.41 billion, marking the weakest performance since the first quarter of 2021. It fell short of the Wall Street consensus ($8.62 billion) and showed a slowdown compared to the previous quarter's growth rate (28%).
Ruth Porat, Alphabet's Chief Financial Officer (CFO), cited "customer optimization efforts" as the reason for cost reductions during the subsequent conference call. However, she did not provide further explanation, which was seen as reinforcing the stock price plunge. Wedbush analyst Scott Devitt analyzed, "Uncertainty in the cloud business segment is the cause of the sharp stock price drop."
In particular, Alphabet's earnings contrasted sharply with those of competitor Microsoft (MS), whose results were released on the same day, darkening future growth prospects further. MS's Azure revenue surged 29% compared to a year ago, clearly confirming growth in the cloud sector. UBS analyzed, "Google Cloud's disappointing results contrast with the better-than-expected MS Azure." KeyBank reported, "Concerns are emerging that Google Cloud is losing market share to MS Azure." Insider Intelligence analyst Max Willens pointed out, "Alphabet is facing fierce competition." Currently, Alphabet's stock is also trading down about 1% in after-hours trading.
On the same day, Apple fell 1.35%, Tesla 1.89%, and Amazon 5.58%, showing overall weakness in tech stocks. Major semiconductor stocks such as Nvidia, AMD, and Intel also dropped 4-5%. Meta Platforms closed the regular session down 4.17% ahead of its earnings release. In contrast, MS rose more than 3%, standing out as the only major big tech stock to gain.
In the New York stock market that day, the Nasdaq index fell 2.43% from the previous session, hit by weakness in big tech stocks including Alphabet and rising Treasury yields. This was the largest drop since February. The large-cap S&P 500 index fell below the 4200 level for the first time since May.
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