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Google Cloud doubles, but Alphabet spends past its cash and the stock falls

Alphabet reported third-quarter revenue of $127.6 billion Wednesday afternoon, up 25%. Google Cloud more than doubled to $30.7 billion, and its operating income rose to $11.1 billion from $3.6 billion a year earlier, a 36.2% margin.

The rest of the release explains the selloff. Capital spending was $51.4 billion, more than double the $24.0 billion of a year ago, and free cash flow was negative $9.1 billion for the quarter. Net income fell to $26.5 billion from $35.0 billion, mostly because an $8.7 billion loss on equity securities replaced a $10.7 billion gain a year earlier. Diluted earnings per share came in at $2.12.

CNBC reports the shares fell more than 10% after hours. Alphabet kept its 2026 capital-spending guidance at $195 billion to $205 billion and said spending will rise significantly in 2027, with details on the fourth-quarter call. Sundar Pichai said search query growth was the fastest in five years and that "Gemini 4 Argon and Carbon are now leading at the frontier."

A cloud business that went from a $3.6 billion to an $11.1 billion quarterly profit in a year is evidence that demand for AI computing is real and paying. A company that turned cash-negative while that happened shows who is fronting the money. SourcesAB

Sources

• AAlphabet third-quarter 2026 results (Form 8-K exhibit)sec.gov
• BAlphabet sinks 10% as it holds 2026 capex unchanged, expects significant increase in 2027 (CNBC)cnbc.com

This story ran in the Morning Brief of October 28th 2026.