Alphabet Revenue Jumps 25% to $127.58 Billion as Cloud Growth Hits 103%
Key Facts
Alphabet reported results on October 28 for the third quarter ended September 30, revealing a 25% year-on-year increase in revenue to $127.58 billion. But the figure fell short of the analysts’ average estimate of $127.97 billion, according to a FactSet survey cited by The Associated Press. The results came as revenue from search and advertising grew more slowly than the company’s overall revenue, while its cloud computing business accelerated sharply. Alphabet shares fell more than 10% in extended trading after the announcement, according to a Reuters report published on October 28. In regular trading that day, GOOGL closed at $324.89, according to EL7 data.
Revenue from Google Search and other advertising rose 12% to $63.3 billion in the quarter, while YouTube advertising revenue increased 9% to $11.2 billion, according to The Associated Press. The agency reported that both increases were below some analysts’ expectations, adding to the gap between overall revenue growth and growth in two of the group’s leading advertising sources. The figures show expansion in advertising activity, but at a slower pace than Alphabet’s 25% growth in total revenue. At the same time, the company said the year-on-year growth rate in search queries reached its highest level in five years. This places the growth in query volume, as described by the company, alongside the 12% increase in search and advertising revenue over the same period.
Google Cloud, by contrast, grew faster, with revenue up 103% to $30.7 billion, according to Alphabet. The company said the expansion was driven by strong growth in the Google Cloud platform and enterprise-focused AI infrastructure solutions, as well as enterprise AI solutions and sales of TPU systems. Alphabet described cloud growth as a record, as the group continues to invest in the capacity needed to meet enterprise demand. The 103% rate highlights a clear gap between cloud growth and the 12% increase in search and advertising revenue and 9% growth in YouTube advertising. However, the group’s total revenue, despite rising 25%, did not reach the analysts’ average estimate reported by FactSet.
At the earnings level, Alphabet reported net income available to common shareholders of $26.17 billion, compared with $34.979 billion in the third quarter of the previous year. Diluted earnings per share fell to $2.12 from $2.87, according to the company’s results. The Associated Press said a $8.7 billion loss on equity investments weighed on profitability and reduced earnings per share by 55 cents. Earnings therefore came in below the year-earlier period, while annual revenue rose 25%. Alphabet-level activities also recorded an operating loss of $7.655 billion, which the company said mainly reflected shared AI research and development expenses.
Capital expenditure remains a key focus of the company’s forward guidance, with Alphabet keeping its 2026 forecast at a range of $195 billion to $205 billion. Chief Financial Officer Anat Ashkenazi said capital spending would rise “significantly” in 2027, while the current-year forecast remained unchanged. The company said it would provide further details on spending during its fourth-quarter earnings call. The guidance links the expansion of AI infrastructure to the spending trajectory beyond 2026, while the quarterly results showed strong cloud growth against slower advertising growth. The fourth-quarter earnings call is expected to be the occasion when management sets out more details of its capital plan.