A global rally in technology shares ground to a halt Thursday after lackluster earnings from two industry heavyweights reignited investor skepticism over whether the billions of dollars being poured into artificial intelligence will ultimately generate sufficient returns, according to Bloomberg .
Nasdaq 100 futures fell 0.9%, signaling the index's three-day advance was set to end, while S&P 500 contracts slipped 0.2% . The pullback was led by sharp declines in Alphabet and Samsung Electronics, with weakness also spreading across the software sector following disappointing quarterly reports from ServiceNow and Fortinet.
Alphabet Slides on Sales Miss
Alphabet shares tumbled 10% in U.S. premarket trading after the Google parent's third-quarter sales underwhelmed investor expectations, reinforcing concerns that the company is losing ground to AI rivals despite hundreds of billions in capital expenditure .
According to the company's official financial report, Alphabet's Q3 revenue rose 25% year-over-year to $127.58 billion, driven by strong growth in search and cloud computing . However, net income fell 24% to $26.47 billion from $34.98 billion a year earlier, largely due to a shift from investment gains to losses. The company recorded a net loss of $8.66 billion on equity securities, compared with a net gain of $10.73 billion in the prior-year period . Diluted earnings per share declined to $2.12 from $2.87 .
Google Cloud revenue surged 103% to $30.71 billion, fueled by high demand for AI infrastructure and enterprise solutions, while the segment's operating profit jumped to $11.12 billion from $3.59 billion . Despite the cloud strength, the top-line miss and profit decline were enough to spook investors already questioning the payoff timeline for Alphabet's massive AI investments.
Samsung Falls on Capital Expenditure Concerns
Samsung Electronics slid 4.1% as the absence of a new shareholder return plan disappointed investors, alongside a chip profit miss and rising capital expenditure .
The South Korean tech giant reported third-quarter revenue of KRW 195.3 trillion and operating profit of KRW 107.4 trillion, marking the world's first tech company to exceed KRW 100 trillion in quarterly operating profit . The Device Solutions division, which houses its semiconductor business, posted KRW 147.1 trillion in revenue and KRW 106.5 trillion in operating profit, with the Memory Business setting an all-time high for quarterly revenue and operating profit .
However, the company's DX division, encompassing mobile and consumer electronics, recorded an operating loss of KRW 0.8 trillion . Investors had apparently anticipated a more robust capital return framework given the extraordinary profit surge, and the lack of a fresh buyback or dividend announcement overshadowed the record headline numbers.
Software Sector Weakens on ServiceNow, Fortinet
Software names also came under pressure following weak quarterly performances from ServiceNow and Fortinet.
ServiceNow shares plunged 18% in premarket trading despite reporting revenue of $4.106 billion, up 20.5% year-over-year and slightly above analyst estimates . Adjusted earnings per share came in at $1.00, missing the consensus estimate of approximately $1.02 . While CEO Bill McDermott characterized the quarter as "more than another beat-and-raise," investor sentiment soured on the earnings miss and concerns about how AI might disrupt the company's core workflow automation business .
Fortinet, meanwhile, saw its stock plunge 25%. The cybersecurity firm reported third-quarter revenue of $2.08 billion, up 20% year-over-year, with product revenue growing 37% to $765 million . GAAP earnings per share were $0.86, and non-GAAP EPS came in at $0.91 . Despite what appeared to be solid headline growth, the market reaction suggested expectations had been set considerably higher.
An exchange-traded fund tracking the software sector dropped 3.4%, reflecting the broad-based retreat .
Broader Market Context
The tech-heavy Nasdaq's three-day rally had been fueled by optimism that AI-driven demand would continue to propel earnings across the sector. Thursday's premarket action suggests that optimism is being tested as investors scrutinize whether the massive capital expenditures being deployed by hyperscalers and chipmakers are translating into sustainable profits.
The S&P 500 had closed Wednesday up 0.3% at 7,743.98 points, while the Nasdaq also gained 0.3% to 26,549.85 . Those gains now appear vulnerable as the market digests the implications of Alphabet's sales miss and Samsung's cautious capital allocation stance.
With doubts resurfacing about the return on AI spending, attention now turns to whether upcoming earnings from other major technology companies can restore confidence—or whether the rally that has defined the sector for much of the year is finally running out of steam.
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