Alphabet reported revenue of $127.6 billion for the third quarter of 2026 on Wednesday, October 28, up 25 percent from $102.3 billion a year earlier. Chief executive Sundar Pichai said the company is now on a half trillion dollar annual revenue run rate, and that the Gemini app has reached one billion users, which he called the fastest growing product in Google's history. (Alphabet (opens in a new tab); Fortune (opens in a new tab))
Revenue came in slightly below the roughly $127.9 billion that analysts had expected, according to Fortune. Operating income rose 30 percent to $40.6 billion, for an operating margin of about 32 percent. (Fortune (opens in a new tab); Alphabet (opens in a new tab))
Cloud and Gemini lead the growth
Google Cloud was the standout. Its revenue reached $30.7 billion, compared with $15.2 billion in the same quarter of 2025, an increase of 103 percent. In the earnings release, Pichai attributed the jump to strong demand for Google's AI infrastructure and AI products, and said the company is seeing strong demand for its TPU systems from a wide range of customers. (Alphabet (opens in a new tab))
Alphabet also said its first party model APIs now process nearly 32 billion tokens per minute, more than four times the volume of a year earlier. Pichai said the new Gemini 4 Argon and Carbon models are leading at the frontier. Search and other revenue grew 12 percent to $63.4 billion, and YouTube advertising revenue rose to $11.2 billion from $10.3 billion. The company also said it passed 150 million YouTube Music and Premium subscribers, including trials. (Alphabet (opens in a new tab))
Record spending and negative cash flow
The cost of that growth is rising quickly. Purchases of property and equipment, the main measure of capital spending, reached $51.4 billion in the quarter, up from $24.0 billion a year earlier. Free cash flow was negative $9.1 billion for the quarter, compared with negative $5.9 billion in the second quarter, according to Fortune. Fortune noted that Alphabet raised $84.8 billion in equity in June, including $10 billion from Berkshire Hathaway, to help fund its AI buildout. (Alphabet (opens in a new tab); Fortune (opens in a new tab))
On the earnings call, chief financial officer Anat Ashkenazi said capital spending is expected to increase significantly in 2027, according to Stock Titan. Earnings per share fell to $2.12 from $2.87 a year earlier, partly because of an $8.7 billion loss on equity securities, which Alphabet said reduced diluted earnings per share by $0.55. (Stock Titan (opens in a new tab); Alphabet (opens in a new tab))
Investors reacted to the spending outlook. Alphabet's Class A shares traded about 9.4 percent below their regular session close shortly after the results, according to Stock Titan, and Fortune reported the stock fell as much as 8 percent in after hours trading. (Stock Titan (opens in a new tab); Fortune (opens in a new tab))
In NeuraFeed's reading, the quarter shows both sides of the AI boom at once. Demand for Google's models and cloud capacity is clearly growing, and a billion user Gemini app puts Google in direct competition with ChatGPT for everyday users. But the bill for data centers and chips is growing faster than cash coming in, and investors are being asked to wait longer for the payoff.
