Alphabet Q3 2026: Google Cloud +103% to $30.7B, but negative free cash flow on AI capex

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Key facts

• Q3 2026 (CNBC; Alphabet release): revenue $127.58B (+25%; est. $128.22B); net income $26.17B ($2.12/share) vs $34.98B a year earlier, partly from an $8.66B loss on equity holdings (stakes in SpaceX and Anthropic), after a $99.03B gain in Q2
• Google Cloud $30.7B (+103%; est. $28.7B); search $63.35B (+12%; est. $64.96B); YouTube ads $11.2B (+9%, below estimates); Google ad revenue $82.01B (+11%)
• Capex $51.36B (est. $55.09B); free cash flow -$9.07B (est. -$2.70B); long-term debt $125.1B, up from $21.6B a year earlier; 2026 capex guidance kept at $195-205B; CFO Anat Ashkenazi: ‘We continue to expect our capex to increase significantly in 2027’
• AI: Pichai said demand for Gemini 4 Argon is strong and Carbon outperforms it ‘on almost every domain’; Google said the Gemini app has reached 1 billion users (first reported in August); Pichai credited AI with the highest query growth in five years. Thomas Kurian (first earnings call as Cloud CEO): ‘extraordinary demand’ from AI labs, capital markets, financial firms and enterprises
• Market: GOOG fell 9-10% after hours; Jefferies’ Brent Thill: ‘The cloud business was the only business that beat’
• Oct 29 session: Alphabet fell more than 12%, erasing more than $500B of market value, its worst one-day performance ever and the second-largest one-day wipeout in market history after Nvidia’s $589B in 2025 (NBC News; FT: a record $500B); the Nasdaq fell about 1.5%. JPMorgan called the search slowdown ‘steeper than expected’; NBC adds that Alphabet has committed more than $1T to multiyear spending agreements (Bloomberg: $1T+ in purchase commitments, future leases and other obligations in its filing, not read by us: 403)
• AI Mode and ads: Search growth slowed to +12% from 17% in Q2 and 19% in Q1 (TechCrunch); chief business officer Philipp Schindler attributed it to ‘lower monetization we were seeing in AI Mode’ (The Register) and announced ‘high-quality ads within AI overviews in AI mode’ expanding to international markets for the first time, plus multi-turn ads in AI Mode in the US; Pichai said AI Mode queries are three times longer on average and one in five involves voice, images or documents. Kurian: over 100 companies use TPUs and ‘all of the inventory for TPU systems are associated with committed contracts’. (The Register gives search revenue as $63.25B; the release says $63,350M.)