Alphabet Revenue Rises 25% to $127.58 Billion as Shares Fall More Than 10%
Key Facts
Alphabet shares fell more than 10% in after-hours trading on October 28 after the company reported third-quarter 2026 revenue of $127.58 billion, up 25% year over year but below analysts’ average estimate of $127.97 billion. Net income fell to $26.17 billion from $34.98 billion in the same period a year earlier. The report coincided with negative free cash flow of $9.07 billion. In after-hours trading, the stock reached $289.95 before falling 10.2% in premarket trading on October 29, according to Reuters.
The decline in net income did not reflect a comparable drop in revenue: quarterly sales grew at a strong pace, while earnings per share were affected by an $8.7 billion loss on equity investments. The Associated Press said the loss reduced earnings per share by 55 cents. The investment loss therefore explains part of the gap between revenue growth and lower profits, but does not by itself explain the stock’s performance or cash flow. GOOGL’s regular-session closing price on October 28, before the results were announced, was $324.89, according to EL7 data. Prices after the announcement reflect after-hours and premarket trading, not the regular-session close.
Google Search and other advertising revenue rose 12% to $63.3 billion, but some advertising results fell short of analysts’ expectations, according to the Associated Press. YouTube advertising revenue also increased 9% to $11.2 billion. The figures paint a mixed picture of the advertising business: continued growth in search and on the platform, alongside results that missed expectations in some areas of advertising. By contrast, Google Cloud reported revenue of $30.71 billion for the quarter ended in September, above analysts’ average estimate of $29.57 billion, which implied growth of 95.1%, according to Reuters. The agency said the cloud unit’s revenue more than doubled, pointing to strong demand related to artificial intelligence.
Attention is turning to the cost of expanding technical infrastructure as demand for AI services continues. Alphabet said 65% of its third-quarter technical infrastructure investment went to servers and networking equipment, while the remaining 35% was allocated to data centers. Operating cash flow was $42.3 billion, but was affected by the build-up of TPU system inventory and a cash payment of $5.2 billion to settle a European Commission fine dating to 2018, according to the earnings call transcript. Meanwhile, the chief financial officer said AI-driven capital expenditures will increase significantly in 2027. This puts the negative cash flow in the context of the company’s expansion, without attributing all spending or the deficit solely to AI.
The CEO said the Gemini app had reached one billion users and described it as the fastest-growing product in Google’s history, according to the Associated Press. That reach comes alongside cloud growth, while investors monitor AI’s effect on the core search business. Reuters quoted a portfolio manager at Aptus Capital Advisors as saying: "In a market that fears AI will detract from the core business, investors need to see search accelerating, not slowing." The comment reflects the market’s concern about the company’s ability to expand AI services without weakening its advertising engine. Reported search growth of 12% remains one of the figures investors will assess in light of that concern.
The pressure extended into U.S. trading on Thursday, October 29, with Alphabet shares falling 11.8% during the session, putting them on track for their worst day since they began trading more than 20 years ago, according to the Associated Press. The session move followed the premarket decline, extending investors’ reaction to the results and spending outlook. The next milestone the company identified in these results is 2027, when capital expenditures are expected to rise significantly. The available evidence did not provide a later date for the spending outlook.