Alphabet Q3 2026 earnings: Google Cloud +103%, FCF −$9.1B

Alphabet (GOOGL) reported revenue of $127.6 billion for the third quarter of 2026 (July–September), up 25% from $102.3 billion a year earlier, in a release filed with the SEC at 4:01 pm ET on Wednesday, Oct 28. Google Cloud revenue more than doubled, up 103% to $30.7 billion, while free cash flow was −$9.1 billion, the second negative quarter in a row, as spending on servers and data centers more than doubled.

The next day the Class A shares fell 12.6%, which CNBC called "the steepest drop on record". Diluted earnings per share were $2.12 under GAAP (US accounting rules), down from $2.87. Alphabet kept its 2026 range for capital expenditures (capex) and said spending will "increase significantly" in 2027.

Alphabet earnings vs a year ago

Source: Alphabet's third-quarter release (8-K, Exhibit 99.1, filed Oct 28, 2026), both columns; checked against StockFit. Revenue and operating income growth are Alphabet's stated rates. Operating margins to one decimal, the margin change, and the net income and EPS changes are MoverTape calculations from company figures. Alphabet reports no adjusted (non-GAAP) EPS.

The business made more money than a year ago, and net income still fell. The difference is below the operating line: other income swung from a gain of $12.8 billion to a loss of $8.2 billion. Alphabet's release puts the loss on equity securities at $8.7 billion and says it reduced net income by $6.7 billion and diluted EPS by $0.55. The 10-Q attributes the swing "primarily" to "net unrealized losses in our marketable equity securities largely from SpaceX". At the end of September Alphabet held $75.2 billion of SpaceX shares, which it cannot sell for a short period (10-Q).

The same kind of item ran the other way last quarter, when gains on equity securities added $6.26 to EPS of $9.11. Our guide explains where one-off gains show up.

Alphabet now has preferred stock outstanding, so two net income lines appear. Net income was $26.5 billion; after $298 million of dividends on the new 6.25% mandatory convertible preferred stock, net income available to common stockholders was $26.2 billion, the figure EPS is based on.

Alphabet earnings vs estimates

Measured against analysts polled by LSEG, CNBC reported "$2.67 adjusted vs. $3.02 expected" for EPS and $127.58 billion of revenue against $128.22 billion expected, which it described as "its first top-and-bottom-line miss in nearly four years" (CNBC, Oct 28). The $2.67 is LSEG's adjusted figure, not one Alphabet reports; Alphabet's own figure is the $2.12 GAAP EPS above, which includes the $0.55 equity-securities loss by the company's count.

CNBC also reported free cash flow of −$9.07 billion against an expected −$2.70 billion, capex of $51.36 billion against $55.09 billion expected, and Search revenue of $63.35 billion against a $64.96 billion estimate. Operating income of $40.58 billion compared with a FactSet forecast of $43.19 billion. Cloud revenue of $30.7 billion compared with $28.7 billion expected.

Going into the week, StockFit's consensus EPS estimate was $2.94 from 14 estimates, as recorded in our preview of the week on Oct 25. Our guide explains why "beat" and "miss" depend on the basis.

Google Services, Google Cloud and Other Bets results

Alphabet reports three segments. Each one's revenue and operating income against a year ago:

Source: Alphabet's third-quarter release (8-K, Exhibit 99.1). Services and Cloud growth are Alphabet's rates; the Other Bets change is a MoverTape calculation from company figures. The segments don't add up to the totals: revenue also includes hedging gains of $194M (a $207M loss a year earlier), and operating income also includes "Alphabet-level activities", a cost of $7.7B against $4.5B, which the release says primarily reflects "shared AI research and development".

Cloud accounted for about 62% of Alphabet's $25.2 billion revenue increase (MoverTape calculation from company figures). Its operating margin rose to 36.2% from 23.7%, while Google Services' rose to 40.7% from 38.5%. Other Bets' operating loss widened to $2.0 billion, which the CFO tied to expanding Waymo's business on the call.

How much of Google Cloud's 103% is the Wiz acquisition?

The 103% is reported growth, and part of it comes from an acquisition. Alphabet completed its purchase of Wiz on March 11, 2026, for $29.5 billion, and the 10-Q says that since then "the financial results are included in our consolidated financial statements within the Google Cloud segment". A year ago, Wiz was not part of Google Cloud. The filing describes the deal as an investment to strengthen Cloud's "multicloud and AI-driven security" capabilities.

Alphabet doesn't disclose how much revenue Wiz contributed, so the organic growth rate (growth without the acquisition) isn't known. The 10-Q attributes the $15.6 billion rise in Cloud revenue "primarily" to growth in Google Cloud Platform, "largely from infrastructure and platform services, and TPU system sales". TPUs are Google's own AI chips, which it now sells to customers as complete systems. Wiz was also inside all of the second quarter, when Cloud grew 82%, so the step up from 82% to 103% compares two quarters that both include it.

Google Cloud backlog

Google Cloud's backlog, signed contracts not yet recognized as revenue, was $560.8 billion at the end of September, up from $513.9 billion three months earlier. Alphabet expects to recognize "just over 55%" of its total backlog of $567.7 billion as revenue over the next 24 months, up from "just over 50%" at the end of June (10-Q filings for both quarters).

Why did Search growth slow?

Google Search & other revenue rose 12% to $63.35 billion. That was essentially flat on the second quarter's $63.27 billion. CNBC put Search growth at 19% in the first quarter and 17% in the second (CNBC, Oct 29), and reported that Search came in below estimates for the second straight quarter. Alphabet said in its release that year-over-year query growth was the highest in five years.

On the call, Chief Business Officer Philipp Schindler named foreign exchange as the largest reason for the slowdown from the second quarter. He also cited some Asia-Pacific retail advertisers being hit by the EU's removal of its de minimis customs exemption, and media and entertainment budgets that moved into June for the World Cup. He added that strong growth in AI Mode queries weighed on revenue because AI Mode currently earns less per query (transcript).

Elsewhere in Services, YouTube ads grew 9% to $11.2 billion, Google Network 1% to $7.5 billion, and subscriptions, platforms and devices 11% to $14.3 billion.

Why did Alphabet's free cash flow turn negative?

Free cash flow is the cash from operations left after purchases of property and equipment, which is Alphabet's own definition. Five quarters of it:

Source: Alphabet's third-quarter release, cash-flow statement and free-cash-flow reconciliation. Q3 2025 free cash flow is a MoverTape calculation from the same statement, using Alphabet's definition.

Capex was 2.1 times its level a year earlier and equal to about 40% of revenue (MoverTape calculations). CNBC noted that the second quarter was the first negative free cash flow in Alphabet's history as a public company. Over the last twelve months, free cash flow was still $19.7 billion.

Two other items weighed on operating cash flow, according to CFO Anat Ashkenazi on the call. First, Alphabet built up inventory for TPU system sales, and inventory rose to $13.3 billion from $2.4 billion at the end of 2025. Second, it paid $5.2 billion in July for the European Commission's 2018 Android fine plus interest, after the EU's top court rejected its appeal (10-Q). Ashkenazi described the TPU cycle as cash going out while inventory is built and coming back once customers are billed, and Google Cloud chief Thomas Kurian said inventory is built only against signed contracts.

How Alphabet paid for it

Alphabet bought back no shares in the quarter, against $11.5 billion a year earlier, and none so far this year. In the quarter it issued senior notes for net proceeds of $28.7 billion and sold shares under its at-the-market program, which lets it sell stock gradually into the market: 12 million Class A shares for $4.3 billion and 24 million Class C shares for $8.1 billion, with $27.6 billion left in the program. Long-term debt rose to $125.1 billion from $46.5 billion at the end of 2025 (release).

Cash and marketable securities were $265.1 billion, against $126.8 billion at the end of 2025, but that total includes $90.4 billion of marketable equity securities, most of it the SpaceX stake. Total assets passed $1 trillion, at $1,003.3 billion (release and 10-Q).

Alphabet's capex guidance for 2026 and 2027

Alphabet's release has no outlook section; its guidance came on the call. Ashkenazi said the 2026 capex range of $195 to $205 billion is unchanged, and added: "We continue to expect our CapEx to increase significantly in 2027, and we'll provide further details on our Q4 call." Capex for the first nine months was $132.0 billion, so the range implies $63 to $73 billion in the fourth quarter (MoverTape calculation).

For the fourth quarter she also pointed to a slightly larger foreign-exchange headwind, mainly in Search and YouTube ads, and to Search growth facing a tougher comparison with last year. In Cloud, she expects TPU system sales to keep growing in the fourth quarter, with a larger revenue ramp in 2027, and near-term pressure on Cloud margins as Alphabet rents third-party computing capacity it began using at the end of September. Higher depreciation will keep weighing on costs.

How far did Alphabet stock fall after earnings?

Alphabet's Class A shares closed at $324.89 on Wednesday, Oct 28, before the release. CNBC reported them down more than 10% in extended trading that evening (story updated 6:07 pm ET). On Thursday, Oct 29, they closed at $283.82, down 12.6%, on 138.9 million shares traded. The Class C shares (GOOG) fell 12.3%, from $321.89 to $282.32. SPY, an exchange-traded fund that tracks the S&P 500, fell 0.38% the same day (StockFit daily closes; MoverTape calculations).

CNBC called it "the steepest drop on record" and linked it to "the weaker-than-expected earnings report and negative free cash flow of $9 billion for the quarter, three times the estimated deficit". In StockFit's daily data, which goes back to 2006, the fall is larger than Alphabet's drops on Sep 29, 2008 and Mar 16, 2020, both about 11.6%.

Analysts quoted by CNBC focused on Search. UBS wrote that the results are "going to bring Search cannibalization fears right back to the forefront", and D.A. Davidson's Gil Luria wrote that "we would not rush to conclusions based on one quarter".

Thursday's close was the lowest since Mar 30 and 29.5% below the 52-week closing high of $402.62 on May 13. It left the stock 9.3% lower for the year, after a 3.8% gain through Oct 28 (StockFit daily closes; MoverTape calculations). Alphabet's company page, linked from the ticker in the first paragraph, has the interactive price chart. We'll add Friday's close when the session ends.

What to watch next

• Friday's close: the second session after the report, added from StockFit after 4:00 pm ET on Oct 30.
• Dividends: a quarterly dividend of $0.22 per share on Class A, B and C stock, payable Dec 14 to holders of record on Dec 7. The preferred dividend is payable Nov 15 (release).
• 2027 capex: Alphabet said it will give "further details" on its fourth-quarter call.
• GFiber: Alphabet agreed to contribute its fiber internet business to a new company, in return for $1.5 billion in cash, a $2.0 billion note and a 49.99% stake. The deal is expected to close in late 2026 (10-Q).
• Ad tech case: in September 2026 a US court ordered behavioral remedies rather than the divestitures the Justice Department sought. Alphabet says it plans to appeal the adverse part of the April 2025 ruling once final judgment is entered (10-Q).

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