Alphabet's revenue jumps 25% as Google Cloud doubles, but profit falls

The essentials: Alphabet, the parent company of Google, reported third-quarter revenue of $127.6 billion on October 28, 2026, up 25% from a year earlier, powered by a 103% surge at Google Cloud. Earnings per share nevertheless fell to $2.12 from $2.87, well below analysts’ expectations, as record spending on artificial intelligence infrastructure and a large loss on investments weighed on the bottom line. According to Yahoo Finance, the shares fell more than 8% after the announcement.

What did Alphabet report?

Indicator	Q3 2026	Compared with Q3 2025
Revenue	$127.6 billion	+25%
Google Services	$96.3 billion	+11%
of which Google Search & other	$63.4 billion	+12%
Google Cloud	$30.7 billion	+103%
Operating income	$40.6 billion	+30%
Net income	$26.2 billion	$35.0 billion a year earlier
Earnings per share (diluted)	$2.12	$2.87 a year earlier
Capital expenditures	$51.4 billion	$24.0 billion a year earlier

Source: Alphabet’s earnings release filed with the US Securities and Exchange Commission.

Google Cloud is now Alphabet’s fastest-growing business. At $30.7 billion, it accounts for almost a quarter of group revenue, and its operating income reached $11.1 billion, against $3.6 billion a year earlier.

Why did profit fall when sales grew so fast?

Two factors explain the gap.

The first is a one-off accounting item. Alphabet booked an $8.7 billion loss on equity securities, the value of the stakes it holds in other companies, compared with a $10.7 billion gain a year earlier. The company says this loss alone reduced net income by $6.7 billion and earnings per share by $0.55.

The second is the cost of the AI race. Capital expenditures, mostly data centers and servers, more than doubled to $51.4 billion in the quarter. According to Yahoo Finance, free cash flow was negative by $9.06 billion, after a negative $5.85 billion in the second quarter, which was already Alphabet’s first negative quarter since its 2004 stock market listing. In July, the group raised its 2026 investment forecast to between $195 billion and $205 billion.

Alphabet did not buy back any of its own shares during the quarter, compared with $11.5 billion a year earlier, but kept its dividend of $0.22 per share, payable on December 14, 2026.

Did the results meet expectations?

Not entirely. According to figures compiled by Yahoo Finance:

• revenue of $127.58 billion was slightly below the $127.93 billion expected;
• earnings per share of $2.12 fell far short of the $3.01 forecast;
• advertising revenue reached $82.0 billion, against $83.5 billion expected;
• Google Cloud, at $30.7 billion, beat the $29.1 billion projected.

What did Sundar Pichai say?

“We had a strong quarter and are now on a half-trillion dollar revenue run rate,” Alphabet’s chief executive said in the earnings release, adding that “Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions.” According to Yahoo Finance, he also said the Gemini app now has more than one billion users.

Why it matters

Alphabet’s results show both sides of the AI boom. Selling computing power and AI services to businesses is now driving growth, while the search engine, still the group’s largest source of revenue, is growing more slowly. The market’s reaction reflects the question hanging over every big tech group: how long can they keep spending tens of billions of dollars per quarter before those investments pay off?