Alphabet Revenue Jumps 25% to $127.6 Billion as Cloud Grows 103%
Key Facts
Alphabet reported on October 28 results for the third quarter ended September 30, with consolidated revenue of $127.6 billion, up 25% from the year-earlier period. The company said it was the thirteenth consecutive quarter of double-digit year-over-year growth. Google Cloud led growth, with revenue rising 103% to a record $30.7 billion. But the core advertising business grew more slowly than the cloud surge, and slower growth in search and advertising raised investor concerns about the pace of expansion. Alphabet shares fell more than 10% to $289.95 in after-hours trading following the results.
Google Cloud revenue rose from $24.8 billion in the second quarter, when it posted year-over-year growth of 82%, to $30.7 billion in the third quarter, as growth accelerated to 103%. Alphabet attributed the performance to demand for AI infrastructure and enterprise solutions, alongside core Google Cloud Platform services. The company added that sales of TPU systems contributed materially to the revenue increase. Cloud operating income rose to $11.121 billion, compared with $2.828 billion in the third quarter of 2025. The figures show that cloud growth extended beyond revenue and was accompanied by a significant increase in operating income.
By contrast, revenue from search and other advertising rose 12% to $63.3 billion, while YouTube advertising revenue increased 9% to $11.2 billion. The Associated Press said both increases came in below some analysts’ expectations, raising concerns about slowing growth. Although search remained the largest advertising business among the figures reported, its growth rate was below Google Cloud’s 103% expansion. This highlighted the contrast between accelerating demand for AI infrastructure services and slower growth in advertising sources. AP reported that cloud supported overall revenue growth, while search and YouTube performance focused attention on the trajectory of the advertising business.
Reported earnings were also affected by a net loss of $8.7 billion on equity securities. Alphabet said in its filing that the net effect of the loss reduced the income tax provision by $1.9 billion, net income by $6.7 billion and diluted earnings per share by $0.55. The Associated Press said the company reported earnings per share of $2.12, including the investment loss’s 55-cent-per-share impact. The agency linked the investment loss to SpaceX, while the company’s filing described it as a loss on equity securities. The loss therefore affected reported profitability, while capital spending continued to weigh on cash flow.
Free cash flow posted a deficit of $9.065 billion in the third quarter, alongside purchases of property and equipment totaling $51.355 billion. That puts spending on infrastructure and chips at the center of the results, as the sharp expansion in cloud revenue coincided with substantial capital needs. Alphabet had raised its annual capital spending forecast in the second quarter to a range of $195 billion to $205 billion. The company said at the time that the wider range reflected an acceleration in capacity deployment to meet rising demand. The free cash flow deficit adds a direct measure of the cost of that expansion during the quarter.
The market reaction came in the session after the results: Class A shares closed down 12.6% on October 29, their worst daily performance since they began trading more than 20 years ago. The Nasdaq Composite fell 1.4% in the same session, while the S&P 500 declined 0.3%. On future spending, the chief financial officer said the company still expects a significant increase in capital expenditures during 2027. She added that further details would be provided during the fourth-quarter earnings call. Markets are awaiting an update on spending levels at that call, along with continued cloud growth and advertising performance.