Alphabet shares fall 10% in premarket after earnings miss on free cash flow

Alphabet shares dropped 10% in premarket trading on Thursday following its Q3 earnings release, which showed a negative free cash flow of $9.07 billion, significantly worse than the $2.70 billion analysts expected. The company maintained its full-year capex guidance of $195-$205 billion. Microsoft shares rose nearly 4% as its capex came in below expectations despite a 27% drop in free cash flow.

Why it matters. The market reaction reflects investor scrutiny of AI spending returns; Alphabet's steep premarket drop, if sustained past 9.77%, would mark its worst post-earnings decline ever, while Microsoft's better-than-expected capex provided a…