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Alphabet Q3 revenue of $127.6 billion rose 25% year over year, Cloud doubled but profit fell short of expectations

Alphabet announced its third-quarter earnings and held a conference call on October 28, 2026. The company’s revenue for the quarter reached $127.6 billion, up 25% year over year, marking the 13th consecutive quarter of double-digit growth, and its annualized revenue run rate had reached $500 billion. Google Cloud revenue rose 103% year over year to $30.7 billion. Both revenue and profit were slightly below Wall Street expectations, and after the earnings release, the stock fell about 9% to 10% in after-hours trading.

CEO Sundar Pichai said the company was using its full-stack AI strategy to sustain momentum across its business lines. AI investment lifted search usage and query growth, with the year-over-year query growth rate reaching a five-year high, while commercial query growth was also strong. The company is building a seamless experience spanning AI Overviews, AI Mode and traditional search, with user queries becoming longer, more personalized and more multimodal. The Gemini app has reached 1 billion monthly active users, becoming the fastest-growing product in Google’s history; first-party model API traffic reached nearly 32 billion tokens per minute, up 40% from the previous quarter and more than four times a year earlier. The company formally announced the launch of the next-generation frontier model Gemini 4 Carbon that day, which ranked ahead in multiple benchmarks, with particularly clear progress in cybersecurity and long-horizon task capabilities; Gemini 4 Argon, launched two weeks earlier, also showed rapid adoption. In addition, the company announced progress on world models such as Genie 4.

Google Services revenue grew 11% to $96.3 billion, including search and other advertising revenue up 12% year over year, YouTube advertising revenue up about 9% to $11.2 billion, and YouTube Music and Premium subscribers, including trials, surpassing 150 million. The rapid growth in cloud business mainly came from strong demand from enterprises for AI infrastructure, AI solutions and TPU systems. Net income attributable to common shareholders for the quarter was $26.2 billion, down year over year, mainly due to losses on equity securities investments (related losses for the quarter were about $8.7 billion). Operating income rose 30% year over year to $40.6 billion, and operating margin increased to 31.8%, but free cash flow turned negative. CFO Anat Ashkenazi said the company expects capital expenditures to increase significantly in 2027, while keeping its full-year 2026 capital expenditure guidance unchanged at $195 billion to $205 billion.

Original sources:

  1. Title: Q3 2026 earnings call: Remarks from our CEO Publisher: Google Blog / Sundar Pichai Publication date: 2026-10-28 URL：https://blog.google/company-news/inside-google/message-ceo/alphabet-earnings-q3-2026/ Source type: official document / original remarks Verification status: full text read in this release; verification date 2026-10-28 Supporting content: revenue up 25%, $500 billion run rate, query growth rate at a five-year high, Cloud up 103%, API nearly 32 billion tokens per minute (up 40% q/q, more than four times y/y), Gemini app 1 billion users, YouTube Music and Premium over 150 million, progress on Gemini 4 Carbon and Argon, Genie 4.

  2. Title: Alphabet (GOOGL) earnings Q3 2026 Publisher: CNBC Publication date: 2026-10-28 URL：https://www.cnbc.com/2026/10/28/alphabet-googl-earnings-q3-2026.html Source type: media report Verification status: full text read in this release; verification date 2026-10-28 Supporting content: revenue $127.58 billion, net income $26.17 billion, free cash flow negative $9.07 billion, Cloud $30.7 billion, search revenue up 12% to $63.35 billion, 2026 capital expenditure guidance $195 billion-$205 billion, significant increase in 2027, after-hours stock decline.

  3. Title: Alphabet Announces Third Quarter 2026 Results (excerpted from 8-K and related reports) Publisher: Alphabet Inc. Publication date: 2026-10-28 URL：https://last10k.com/sec-filings/googl/0001652044-26-000080.htm（及多份媒体转引） Source type: official document Verification status: summary read and cross-checked in this release; verification date 2026-10-28 Supporting content: revenue $127.6 billion, operating income about $40.6 billion, operating margin 31.8%, 13th consecutive quarter of double-digit growth.

ABAB AI Insight

Sundar Pichai emphasized on the conference call that the full-stack AI strategy has translated into search query growth and Cloud demand. Among the Gemini 4 series, Argon was launched two weeks earlier, and Carbon was announced on earnings day, ranking first on the Artificial Analysis Intelligence Index (score 59). First-party API token processing volume grew 40% quarter over quarter, indicating accelerated adoption on the developer and enterprise side. At the same time, the company still positions search as optimizing the experience first and monetizing later, and AI Mode queries are on average three times longer than traditional search queries.

On the capital path, capital expenditures for the quarter reached $51.36 billion, full-year guidance was maintained at $195 billion to $205 billion, and capital expenditures are expected to rise significantly in 2027. Free cash flow was negative for a second consecutive quarter, mainly due to data center and TPU capacity expansion. Cloud revenue grew 103% to $30.7 billion, making it the only business that significantly beat expectations and contributing most of the incremental revenue, while Google Services still contributed most operating profit. Losses on equity securities investments of about $8.7 billion, partly related to SpaceX holdings, weighed on net income.

Compared with hyperscale cloud providers such as Microsoft and Amazon, Alphabet is more aggressive in vertical integration of its in-house TPUs and models, and Cloud growth is significantly faster than the overall business. The difference is that search advertising is still the profit core, and the lift in query volume from AI has not yet fully translated into an equivalent acceleration in ad revenue. Investors’ doubts about the pace of returns on short-term spending were reflected in an after-hours stock drop of about 10%.

This earnings report shows that AI infrastructure demand has been translated into high Cloud growth, but high capital expenditures and negative free cash flow make the payback period a key market valuation variable. Metrics to watch include Cloud operating margin in subsequent quarters, monetization progress for AI Mode, and the specific capital expenditure guidance for 2027.

ABAB News · Cognitive Law

  1. Cloud growth has doubled, search advertising remains the main profit engine, and the returns on AI investment are first reflected in infrastructure rather than ad acceleration.

  2. Five-year-high query volume and lower net income coexist, with equity investment losses and capital expenditures jointly squeezing short-term cash flow.

  3. Faster model iteration and capacity expansion are proceeding in parallel, and the market remains cautious about the 2027 capital expenditure that is said to increase significantly.