Overview
Since the Report − 11.2%
Revenue grew 24.7% year over year, EPS missed the estimate by 29.8%; the stock fell 9.2% in its first reaction.
- RevenueQ3
- $127.58B
- ▲ 24.7% YoY · 0.5% Below Estimate
- EPSGAAP
- $2.12
- Estimate $3.02 · 29.8% Below
Verdict
SELLAlphabet grew third-quarter revenue 24.7% to $127.58 billion, and Google Cloud grew 103%. The stock fell 9.2% after hours because EPS came in 29.8% below the estimate and free cash flow turned negative. The next thing to watch is the capital spending plan, which the earnings call should clarify.
Close on Report DayOct 28
$324.89▼ 9.2%Report-Day Move
- Market Cap(Today)
- ≈ $3.53 T
- 1Y Return(At Report)
- + 22%
- P/E(At Today's Price · $19.16 · Trailing 12M)
- 15.1
- Net Margin(Trailing 12M)
- 54.8%
Earnings Summary
In 30 Seconds- Revenue rose 24.7% to $127.58 billion, and Google Cloud grew 103%, beating its estimate by 3.7%.
- GAAP EPS of $2.12 came in 29.8% below the estimate; an investment loss cut EPS by $0.55.
- The stock fell 9.2% after hours as free cash flow turned negative and the company sold shares.
The Numbers
Google Cloud
$30.71B
▲ 103% YoY · 3.7% Beat
Operating Margin
31.8%
Year Ago 30.5% · Up 1.3 Points
Free Cash Flow
−$9.07B
Capital Spending $51.36B
Stock Reaction
▼ 9.2%
After Hours, 4:37 P.m. ET · Not Settled
Quarterly Revenue ($ Billion)
102
Q3 25 · $102 B
114
Q4 25 · $114 B · QoQ + 11.2%
110
Q1 26 · $110 B · QoQ − 3.5%
120
Q2 26 · $120 B · QoQ + 9.0%
128
Q3 26 · $128 B · QoQ + 6.5% · YoY + 24.7%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
Q4 2026 Company Guidance
- 2026 Capital Spending195 – 205 billion195 billion205 billion
Set in Q2 · $131.95B Spent in Nine Months · Earnings-call Details Will Be Added Tonight.To Be Updated on the Call
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±2.9% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Google Services$96.3 BShare 75.6%▲ 10.6% YoY
Search, YouTube, Network, subscriptions
- Google Cloud$30.7 BShare 24.1%▲ 102.6% YoY
- Other Bets$372 MShare 0.3%▲ 8.1% YoY
Key Metrics
Search and Other Revenue
$63.4 B
▲ 12.0% YoYPress Release
YouTube Ad Revenue
$11.2 B
▲ 9.2% YoYPress Release
Google Cloud Operating Income
$11.1 B
▲ 209.4% YoYPress Release
Capital Expenditures
$51.4 B
▲ 114.4% YoYPress Release
Operating Cash Flow
$42.3 B
▼ 12.6% YoYPress Release
Employees
205 K employees
Press Release
Shares are computed over the segment total: $127 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“We had a strong quarter and are now on a half-trillion dollar revenue run rate. Our AI investments are driving overall Search query growth, including commercial queries. In fact, our year-over-year query growth rate is the highest it's been in the last five years. Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions.”
- Half-trillion-dollar Revenue Run Rate
- Fastest Search Query Growth in Five Years
- Strong Demand for TPU Systems
Summary and Review
Summary
Alphabet's revenue rose 24.7% year over year to $127.58 billion. The market expected $128.2 billion, so revenue is in line, 0.5% short. GAAP EPS came in at $2.12, 29.8% below the $3.02 estimate; the earnings gate is closed. An $8.66 billion loss on equity securities cut EPS by $0.55. The company gives no revenue guidance, so the guidance gate is not counted. Google Cloud, by contrast, grew 103% and beat its estimate by 3.7%. Operating income rose 30% to $40.58 billion.
The stock closed the regular session up 1.3% at $324.89. After hours it fell 9.2% to $295.16; that price is as of 4:37 p.m. ET and has not settled. The market did not read this report as a growth story; it read it as a funding story. Free cash flow was negative $9.07 billion. Instead of buying back stock, the company sold $12.4 billion of shares in the market. The stock had risen 21.5% over the past year.
The score is 46 and the view is sell; the score rates the quarter, not the stock. The earnings gate is closed and the revenue gate is in line; the decision table puts this mix in the 40-49 band. Even excluding the investment loss, EPS is 11.6% below the estimate. Cloud strength puts the score at the top of the band. But negative free cash flow and share sales show capital intensity has entered a new phase. The score will be reassessed with the call details.
Full Review
Cloud doubled.
Google Cloud revenue rose 103% year over year to $30.71 billion. The market expected about $29.6 billion, a 3.7% beat. Cloud operating income rose from $3.59 billion to $11.12 billion. Operating margin climbed from 23.7% to 36.2%, an expansion of 12.5 points. Cloud now accounts for 24.1% of total revenue. About 62% of the total revenue increase came from cloud. CEO Sundar Pichai said in the release that demand for TPU systems is strong across a wide range of customers. A day earlier, Oracle announced it will offer Google TPUs on its own cloud starting in 2027. That shows Alphabet is starting to sell its AI chips through outside partners as well. The updated cloud backlog figure will come on the call.
Advertising is growing slowly.
Search and other revenue rose 12.0% to $63.35 billion. YouTube ad revenue rose 9.2% to $11.21 billion. Google Network revenue grew only 1.4%. Subscriptions, platforms and devices grew 11.0%. Google Services in total grew 10.6% to $96.30 billion. The segment's operating margin was 40.7%, compared with 38.5% a year ago. Pichai says annual query growth is the highest in five years. But that growth is not reaching revenue at the same pace. Advertising is still the company's cash machine, but cloud now carries the growth story. The Gemini app also reached one billion users. On subscriptions, YouTube Music and Premium passed 150 million subscribers, including trials.
Free cash flow turned negative.
Capital spending was $51.36 billion. A year ago it was $23.95 billion, an increase of 114%. Operating cash flow fell 12.6% to $42.29 billion. Free cash flow was negative $9.07 billion. The company bought back no stock this quarter, after $11.50 billion of buybacks a year earlier. Instead, it raised $12.4 billion through an at-the-market share sale program. It also issued $28.7 billion of bonds. The cost of AI infrastructure is now clearly visible on the balance sheet. Quarter-end cash and marketable securities totaled $265.1 billion. That can cover funding needs for a long time. See the cash flow guide and the share buyback guide for background.
Why earnings fell.
GAAP EPS was $2.12. A year ago it was $2.87, a decline of 26%. The main reason is an $8.66 billion loss on equity securities. A year earlier the same line showed a $10.73 billion gain. The company says the loss cut EPS by $0.55. Excluding that effect, EPS is about $2.67, still 11.6% below the estimate. Operating income, by contrast, rose 30% to $40.58 billion. Operating margin was 31.8%, compared with 30.5% a year ago. Alphabet-level unallocated costs rose from $4.47 billion to $7.66 billion. So the core business is more profitable, but the investment portfolio dragged net income lower. Strength at the operating level partly offsets the drop in net income.
Next quarter, watch one line.
The average 12-month analyst target is $425.04. Based on the pre-report close, the stock trades 30.8% below it. GAAP EPS over the past four quarters totals $19.16. That total is inflated by investment gains; the second quarter alone was $9.11. So valuation based on the four-quarter total can mislead. The one number for readers to track is free cash flow. If it turns positive again in the fourth quarter, the spending cycle is manageable. If it stays negative, share sales and debt funding become permanent. The second gauge is cloud margin; holding above 36% shows the investment is profitable. The capital spending plan on the call will set the direction of both gauges. This guide explains how to read an earnings day.
Looking Ahead
Strengths and Risks
5 Strengths · 5 RisksStrengths
5- Google Cloud revenue rose 103% to $30.71 billion and beat the estimate by 3.7%.
- Cloud operating margin expanded 12.5 points in a year to 36.2%.
- Operating income rose 30% to $40.58 billion.
- The Gemini app reached one billion users.
- Oracle will offer Google TPUs on its own cloud starting in 2027.
Risks
5- Capital spending rose to $51.36 billion and free cash flow turned to negative $9.07 billion.
- The company sold $12.4 billion of shares in the market and issued $28.7 billion of bonds.
- GAAP EPS came in 29.8% below the estimate.
- Google Network revenue grew only 1.4% year over year.
- The company made no share buybacks this quarter.
What to Watch
4- An update on the 2026 and 2027 capital spending plan is expected on the earnings call.
- The $0.22 per-share quarterly dividend will be paid on December 14.
- Fourth-quarter results are expected in early February 2027.
- Google TPU service on Oracle's cloud will launch in 2027.
Upcoming Earnings
To Understand This