Alphabet, Google's parent company, lost just over $500bn (£374bn) in market value on Thursday after its latest quarterly update rattled investors. The company's stock hit a six-month low.
Alphabet reported that total revenue grew 25% from a year earlier, reaching $127.6bn. Google Cloud revenue grew 103% to almost $31bn. Profits fell 25% during the quarter, however, and the company showed negative free cash flow of more than $9bn, almost twice the cash loss it reported three months earlier.
The company said its AI summaries on search were affecting ad revenue. Google's search engine now defaults to AI summaries of a person's query, and the BBC reports this reduced the number of ads the company could sell during the quarter. Ads alongside search results make up the vast majority of Alphabet's business.
Tracy Woo, a principal analyst at Forrester, said Alphabet's search results "highlights the challenge of funding massive AI investments while maintaining the strength of established businesses."
Phillip Schindler, Google's chief business officer, said on Wednesday that he felt "very good about our trajectory" with an AI-focused version of the search engine. Even so, the stock fell almost 13% on Thursday, its second-lowest showing this year.
Microsoft and Amazon also updated investors this week and said they would keep spending heavily on AI.