Alphabet On Thursday, before the market opened, there was a significant decline, while Microsoft's shares rose. Investors focused on the latest expenditure and free cash flow data in the third-quarter financial reports of these two tech giants.

Alphabet is down 10% at the moment, while Microsoft has risen by nearly 4%.

If Alphabet closes down more than 9.77% on Thursday, it will be the worst market reaction to its financial reports in its history. The company went public in 2004.

Microsoft announced that its capital expenditures and finance lease expenditures for the third quarter amounted to $45.2 billion, a 30% increase from the same period last year, but were lower than the analysts' forecast of $50.67 billion. Free cash flow decreased by 27% to $18.63 billion, although it remained positive.

In contrast, Alphabet reported a negative free cash flow of $9.07 billion for the third quarter, a decline far exceeding analysts' expectations of $2.7 billion. Google's parent company maintains its annual capital expenditure guidance between $195 billion and $205 billion.

At the time of this financial report release, investors are examining technology companies' artificial intelligence spending plans and paying attention to the returns on these investments.

Quilter Cheviot Global Technology Research Director Ben Barringer said on Thursday: "Microsoft is building its architecture in a cautious manner, which results in fewer surprises."

Barringer added, "In contrast, the stock price of Alphabet was hit after the market close due to a set of rather confusing performance figures, as well as a poorly managed earnings conference call."

In early trading on Thursday, the NASDAQ 100 index futures fell by more than 1%.

Under pressure in search business

Alphabet The largest source of revenue, search advertising, grew by 12% in the September quarter, reaching $63.35 billion, but it still fell short of analysts' expectations, further putting pressure on the company's stock price.

Alphabet Chief Commercial Officer Philipp Schindler stated that the search business has been affected, partly due to the weaker monetization capabilities within the company's AI Mode. He added that Alphabet is currently expanding advertising placements in its AI Overviews and AI Mode products, including international markets.

Google's search business has always faced competition from other artificial intelligence chatbots such as ChatGPT and Claude from OpenAI. People may be conducting more search queries outside of Google. Google's own artificial intelligence chatbot, Gemini, has not been able to keep up with its competitors.

Barringer The problem with Google is that it finds itself in the dilemma of an innovator: it doesn't know whether to protect its core business or to embrace this disruption. As a result, Google has lost its advantage in Gemini and is lagging behind its peers in terms of proxy-based AI.

Robert Hum, Samantha Subin, and Jordan Novet of CNBC have contributed to the reporting of this article.