Alphabet Misses on Q3 Earnings as Google Cloud Revenue Doubles; Shares Slide After Hours on Cash Burn

GOOGL reported third-quarter 2026 revenue of $127.58 billion on Oct. 28, up 25% from a year earlier but slightly below the $128.22 billion LSEG consensus. Diluted earnings per share were $2.12 against a $3.02 LSEG estimate; on an adjusted basis CNBC put EPS at $2.67, still well short. Part of the gap came from an $8.66 billion net loss on equity securities, which Alphabet's earnings release says reduced net income by $6.7 billion and diluted EPS by $0.55; investor Gary Black tied the loss to its SpaceX shares. Operating income rose 30% to $40.58 billion, still short of the $43.19 billion FactSet forecast.

The bright spot was Google Cloud. Revenue rose 103% to $30.7 billion, ahead of the roughly $29.1 billion estimate, and cloud operating margin widened to 36.2% from 23.7%, for segment operating income of $11.1 billion. The advertising engine was softer: total ad revenue of $82.0 billion trailed the $83.6 billion estimate, Search and other revenue of $63.35 billion grew 12% but missed a $64.96 billion forecast, and YouTube ads came in at $11.2 billion against $11.4 billion expected. Alphabet also said the Gemini app has reached one billion users.

Cash generation is what unsettled investors. Free cash flow for the quarter was negative $9.07 billion, a far deeper shortfall than analysts expected, as purchases of property and equipment reached $51.4 billion. Spending outside the operating segments also climbed: Alphabet-level activities, mainly shared AI research and development, lost $7.7 billion, up 71%, and Other Bets lost $2.0 billion, offsetting much of Cloud's profit. Research and development costs grew 36%, faster than revenue.

The stock fell about 8% after hours to roughly $295 as the numbers crossed, and CNBC reported the decline reached about 10% after management held its 2026 capital expenditure range at $195 billion to $205 billion and said spending would rise significantly in 2027. For holders of GOOGL, the open question is whether Cloud's doubling revenue and widening margins can outrun an AI buildout that has pushed quarterly free cash flow below zero. Watch the specifics of the 2027 capex outlook, promised for the fourth-quarter call, and whether Search growth reaccelerates.