Alphabet Holds 2026 Spending at $195–205 Billion as Cloud Revenue Jumps 103%
Key Facts
Alphabet kept its 2026 capital spending range at $195 billion to $205 billion, after raising it in the previous quarter from $180 billion to $190 billion, while reporting third-quarter revenue growth of 25% to $127.577 billion. The forecast was unchanged as cloud computing accelerated and TPU system sales contributed to its growth, while the company faced a much larger negative free cash flow than analysts had estimated. Chief Financial Officer Anat Ashkenazi said AI-driven capital spending would “increase substantially” in 2027. She said further details would be presented during the fourth-quarter earnings call. Alphabet shares fell more than 10% in extended trading after the results were announced on October 28, to $289.95.
Google Cloud revenue hit a record $30.71 billion in the third quarter, up 103% year over year and above the analyst average estimate of $29.57 billion. Analysts had expected growth of 95.1%, according to data compiled by LSEG and cited by Reuters. Alphabet said in its earnings release that TPU system sales contributed meaningfully to the segment’s revenue growth. Those sales matter because they allow the company to generate revenue from its computing systems in addition to running its cloud services on them. The company expects TPU system sales to continue expanding in the fourth quarter, with a clearer increase in related revenue during 2027.
Cloud growth came alongside a rapid expansion in infrastructure spending. Alphabet spent $80.6 billion on property and equipment in the first half of 2026, compared with $39.6 billion in the same period of 2025. The company began using computing capacity from third parties at the end of the third quarter, the CFO said, and plans to increase its use in the fourth quarter. Ashkenazi said the company expects “near-term margin pressure” as it brings that capacity online. This adds operating costs to the wave of capital investment, while the company said spending would see another significant increase in 2027.
The investment showed up in cash available after spending: Alphabet reported negative free cash flow of $9.07 billion in the third quarter, compared with analysts’ estimate of negative $36 million. The cash shortfall came alongside strong growth in group and cloud revenue, but highlighted the cost of expanding computing capacity. Net income also fell to $26.17 billion from $34.98 billion in the third quarter of 2025. Earnings per share were $2.12, below analysts’ estimate of about $3.01, according to the Associated Press. As a result, the cloud revenue beat coincided with earnings and cash flow results that were weaker than expected.
Alphabet’s total revenue rose to $127.577 billion in the quarter ended September 30, 2026, from $102.346 billion in the same period of 2025. That represented annual growth of 25%, compared with growth of 16% in the year-earlier period cited in the earnings release. Google Cloud’s surge and the contribution from TPU systems were among the quarter’s key performance factors disclosed by the company. But net income and earnings per share showed that revenue growth did not translate into higher quarterly profits. The company’s guidance focused on continued investment in capacity needed to meet computing demand, with TPU system revenue expected to expand.
Alphabet’s board kept the regular cash dividend at $0.22 per share, payable on December 14, 2026, to shareholders of record on December 7. The fourth-quarter earnings call will be the occasion when the company said it would provide further details on its capital spending outlook. Alphabet also expects a significant increase in spending during 2027, without giving a new numerical range for that year in the release. In its cloud business, the company expects TPU sales to continue expanding in the fourth quarter. It expects these systems’ contribution to revenue to become clearer during 2027.