Google's share price slumped as AI data center build-out drove $9bn of negative cash flow, while the search and cloud giant said capex spending will continue as planned.

Google's parent company, Alphabet, saw its share price fall sharply after it reported an unexpected negative cash flow of $9 billion, driven largely by its investments in digital infrastructure.

The company's earnings for the three months to the end of September showed revenue growth of 25 percent, to $127.58 billion. That was slightly below the expected $128.22 billion.

Negative cash flow had been expected to be around $2.7 billion, but came in at $9.01 billion. CFO Anat Ashkenazi told investors that the larger-than-expected figure was "driven by our investments in capex."

Google has been investing heavily in data center infrastructure to support its AI products and has started selling its custom-designed TPU AI chips to third parties. It is working with Blackstone to create a US-based cloud platform offering its TPUs, named Crux AI. Neocloud Fluidstack is also known to be deploying TPUs for Anthropic in a series of Google-backed deals.

This week, it was revealed that TPUs would be available on Oracle's OCI cloud platform from next year. Oracle's Karan Batta told DCD that the deal is a "multi-year, multi-gigawatt" partnership.

All of this requires a large amount of money up front. Google spent $51.36 billion on capex in the last quarter while maintaining its guidance for annual spending of up to $205 billion in 2027, with $300 billion to come in 2028.

The company's share price slumped as much as 10 percent in after-hours trading, ahead of the market opening on Thursday.

Ashkenazi added that the company's cash flow had been "negatively impacted by the buildup of inventory for TPU system sales," as well as a $5.2 billion cash payment for a 2018 European Commission fine for breaching EU antitrust rules with its Android mobile operating system.

There was better news in Google Cloud, where quarterly revenue grew 108 percent year on year, to $30.7 billion.

Google's results were published on the same day as those of rival hyperscaler Microsoft, whose share price climbed after it announced its own results. Microsoft reported positive free cash flow of $18.63 billion despite heavy investment in its own AI infrastructure build-out, with capex of $45.2 billion.