Alphabet just had its worst day as a public company. BofA now

Search revenue missed forecasts and free cash flow went negative. Bank of America now values Google’s core search business at about 10 times earnings, against 18.7 for the S&P 500. Google search, the business that paid for two decades of Alphabet’s ambitions, is now valued at about 10 times earnings, by Bank of America’s count.

The S&P 500 trades at 18.7x forward earnings, according to FactSet. Energy, the market’s cheapest sector, trades at 13x. That math pummeled the stock Thursday.

Alphabet’s Class A shares fell 12.6% to $283.82, their worst day since they began trading in 2004. The decline wiped out about $482 billion in market value. Previously, Alphabet’s worst day was in March 2020 when the stock dropped 11.6%.

The trigger was the search business—the same juggernaut that turned Google into a verb. Search and other revenue grew 12% in the third quarter to $63.35 billion. Analysts expected 15%.

That miss on growth momentum compares to 17% growth in the second quarter and 19% in the first. Meanwhile, Google Cloud’s revenue more than doubled, up 103% to $30.71 billion.

But Alphabet spent $51.4 billion on capital expenditures in the quarter, more than double a year earlier, and free cash flow came in at negative $9.1 billion, according to its earnings release. Three months ago, BofA analyst Justin Post had the whole company at about 22x his 2027 earnings estimate, which he called in line with historical averages.

On Thursday, at the after-hours price of about $291, he had it at about 19x, with core search at about 10x inside that. He kept his Buy rating, cut his price target to $380 from $430, and lowered the multiple he’s willing to pay to 24 times from 27, citing the “slowdown in high-margin search growth.” “Search AI transition will fuel the bears,” Post and co-author Nitin Bansal wrote.

More searches, slower growth The search slowdown comes even as Google says more people are searching. “Our year-over-year query growth rate is the highest it’s been in the last 5 years,” CEO Sundar Pichai said on Wednesday’s earnings call.

BofA estimates search growth, excluding currency moves, slowed three percentage points from the prior quarter, “despite accelerating y/y query growth.” The analysts put most of that on a comparison that was two points tougher than last quarter’s. They wrote that Google indicated the shift of traffic to AI Overviews, the AI-written summaries at the top of results, was a small headwind in the quarter.

They added that it’s “likely bigger” internationally, where advertising loads in those summaries are just starting to ramp. Google’s answer is more ads inside the summaries.

“We’re now scaling high-quality ads within AI Overviews and AI Mode to more users and queries,” chief business officer Philipp Schindler said on the call. “This includes taking our monetization footprint global for the first time.” The summaries change what users do on the page.

A Pew Research Center study published in July 2025 found that users who saw an AI summary clicked a traditional search result on about 8% of visits, compared with 15% when no summary appeared. That study measured clicks to websites, not Google’s ad revenue.

Paying for the cloud Most of the gap between Alphabet trading at 19x earnings and search’s 10x earnings comes from the boost in value from Google Cloud. Its operating margin was 36.2% in the quarter, up from 23.7% a year earlier.

There’s also another revenue stream to add in to the sum-of-the-parts. BofA now models $75 billion in 2027 sales of TPUs, Google’s in-house AI chips, to outside customers.