Alphabet Inc.
GOOGL · Nasdaq
Next quarter
Expected to report Feb 3, 2027 — estimated from last year’s reporting date.
Consensus is $3.14 EPS for Dec 2026 across 13 estimates, ranging $2.70 to $3.34.
GOOGL Sep 2026
- 27.89%
- -12.64%
- $2.94
- $2.12
- —
- $127.58B
Reported results
- $127.58B
- 59.70%
- $40.58B
- 31.81%
- $26.47B
- $2.12
Highlights
- Revenue growth: Q3 revenue rose 25% year over year to $127.6 billion, the 13th consecutive quarter of double-digit growth, and increased 6.5% from Q2’s $119.8 billion.
- Google Cloud: Revenue more than doubled, up 103% to $30.7 billion; operating income more than tripled to $11.1 billion, with a 36.2% margin versus 23.7% a year ago.
- EPS miss: Diluted EPS of $2.12 was 27.9% below the $2.94 consensus and down from $2.87 a year ago. A $8.2 billion net other expense, primarily an unrealized loss on SpaceX shares, weighed on results.
- Search and Services: Google Services revenue grew 11% to $96.3 billion, including 12% growth in Search to $63.4 billion; Search query growth was the highest in five years.
- Cash investment: Capital expenditures reached $51.4 billion, exceeding operating cash flow of $42.3 billion and resulting in negative free cash flow of $9.1 billion.
- AI adoption: The Gemini app reached 1 billion users; first-party model APIs processed nearly 32 billion tokens per minute, over four times the year-ago level and 40% more than Q2.
- Investment outlook: Full-year 2026 CapEx guidance remained $195 billion–$205 billion, with significant growth expected in 2027; management expects near-term Cloud margin pressure as third-party compute capacity ramps.
Analysis
Alphabet delivered broad operating growth in Q3, but investment-related volatility below operating income drove a sharp earnings miss. Revenue was $127.6 billion, up 25% year over year and 6.5% sequentially, while operating income rose 30% year over year to $40.6 billion and operating margin expanded to 31.8%. Diluted EPS was $2.12, versus the $2.94 consensus and $2.87 in Q3 last year. Net income available to common shareholders fell 25% year over year to $26.2 billion, as other income and expense swung from a $12.8 billion gain to an $8.2 billion loss, primarily reflecting a decline in SpaceX’s stock price. EPS also fell from $9.11 in Q2, when net income was unusually elevated at $112.2 billion by investment gains.
The main operating story was the combination of accelerating AI demand in Cloud and resilient growth in Search. Cloud revenue surged 103% to $30.7 billion and its operating margin rose to 36.2%; Services revenue grew 11%, led by Search’s 12% increase and record five-year query growth. That demand is being met with heavy infrastructure spending: Q3 CapEx of $51.4 billion exceeded operating cash flow, leaving free cash flow negative at $9.1 billion. Management maintained 2026 CapEx guidance but expects a significant increase in 2027, while warning that added third-party capacity will pressure Cloud margins near term.
Earnings and investment volatility
- Operating performance: Revenue increased 25% to $127.6 billion from $102.3 billion a year ago. Operating income rose 30% to $40.6 billion, and operating margin improved from 30.5% to 31.8%. Sequentially, operating income was essentially flat versus $40.8 billion in Q2.
- Below-the-line reversal: Other income and expense moved from a $12.8 billion gain in Q3 2025 to an $8.2 billion expense in Q3 2026. The $8.7 billion loss on equity securities was primarily due to the lower SpaceX share price; the company said it reduced net income by $6.7 billion and diluted EPS by $0.55.
- Per-share results: Net income available to common shareholders was $26.2 billion, down 25% year over year. Diluted EPS declined to $2.12 from $2.87 and missed the $2.94 consensus by 27.9%; $0.30 billion of preferred dividends also reduced income available to common holders.
Google Cloud momentum
- Revenue and mix: Cloud revenue climbed 103% to $30.7 billion from $15.2 billion. Management attributed growth to AI infrastructure and solutions, core GCP services, and TPU system sales; GCP represented the vast majority of Cloud revenue, and growth excluding TPU sales remained very strong.
- Profitability: Cloud operating income increased to $11.1 billion from $3.6 billion, lifting the margin to 36.2% from 23.7%. Management said third-party bridging capacity came online only at quarter-end and had limited margin impact in Q3; use is expected to ramp in Q4 and create near-term pressure.
- Visibility and supply: Cloud backlog was $561 billion, with just over 55% expected to be recognized as revenue over the next 24 months. Management expects TPU system sales to continue scaling in Q4, with a meaningful revenue ramp in 2027, while noting supply constraints and substantial demand across customer types.
Search and AI adoption
- Search growth: Search and other revenue rose 12% to $63.4 billion. Management said year-over-year query growth was the highest in five years, including commercial queries; paid clicks increased 8% and cost per click rose 4%.
- Monetization transition: Management linked some Search growth-rate deceleration to foreign exchange, vertical-specific spending dynamics, and lower monetization of rapidly growing AI Mode queries. It is expanding ads in AI Overviews and AI Mode to more users and queries, including international markets, while prioritizing engagement before scaling formats.
- Product usage: Gemini reached 1 billion users, and first-party model APIs processed nearly 32 billion tokens per minute—40% above Q2 and more than four times the year-ago rate. YouTube ads grew 9% to $11.2 billion, while subscriptions, platforms and devices increased 11% to $14.3 billion; YouTube Music and Premium exceeded 150 million subscribers, including trials.
Infrastructure spending and cash
- Cash generation: Operating cash flow was $42.3 billion, down from $48.4 billion a year ago. The company cited inventory buildup for TPU sales and a $5.2 billion cash payment of the final European Commission Android fine as cash-flow pressures.
- Capital intensity: CapEx was $51.4 billion, versus $24.0 billion a year ago, leaving Q3 free cash flow at negative $9.1 billion compared with positive $24.5 billion in Q3 2025. Trailing-12-month free cash flow was $19.7 billion.
- Funding and commitments: Alphabet ended the quarter with $265.1 billion in cash and marketable securities and $125.1 billion of long-term debt. Q3 financing included $28.7 billion of net proceeds from senior notes and $12.4 billion from ATM share issuance. Management kept 2026 CapEx guidance at $195 billion–$205 billion and expects CapEx to increase significantly in 2027; it also cited $924 billion of future purchase commitments and $152 billion of pre-commencement leases and other obligations.
Services and other segments
- Google Services: Revenue increased 11% to $96.3 billion and operating income rose 17% to $39.2 billion, for a 40.7% margin. Search was the main advertising growth driver; YouTube ads rose 9%, while Network ads increased 1% to $7.5 billion.
- Other activities: Other Bets revenue was $372 million and its operating loss widened to $2.0 billion from $1.4 billion, as Alphabet continued investing in Waymo and other initiatives. Alphabet-level operating costs, primarily shared AI research and development, increased to $7.7 billion from $4.5 billion.
