Google stock gets shredded after earnings—here's 2 reasons why investors hated the quarter

Sizzling Google Cloud growth of 103% isn't going to cut it for Alphabet ( GOOGL ) bulls the day after earnings.

Alphabet shares tanked 10% in pre-market trading on Thursday after a third quarter that could best be characterized as a letdown.

The Street is locked in on two aspects of the quarter.

First, Google's search business notched sales of $63.4 billion, below the $64.9 billion expected. The miss fueled fears Google's search empire is being chipped away by the likes of Claude and ChatGPT, despite massive investment by Google.

Second, Google posted negative free cash flow of $9.1 billion versus a Wall Street estimate for negative $3.5 billion. In a market getting jittery about negative free cash flow at Big Tech (see the reaction to Meta's ( META ) results last week, when it also had negative free cash flow for the first time in years), Google's print stunk up the joint.

"The bears will argue this is the first quarter that AI is starting to seriously hurt their search business and perhaps YouTube is facing some content monetization issues. Our view is that clearly there is some effect from consumers interacting with less advertising when they go to Google search and use Google AI (1B AI users and queries are at a 5 year high) as Google transitions to a world of AI and inevitably AI agents," Pivotal Research CEO Jeffrey Wlodarczak said.

Overall, Alphabet delivered a rare double-miss in its third-quarter earnings report, posting $127.57 billion in revenue against Wall Street's $128.2 billion consensus estimate.

Bottom-line results disappointed significantly as earnings per share fell to $2.12, badly missing analyst projections of $3.02 per share.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the Sozzi Unleashed morning show, the ' Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team.