Gotrade News - Alphabet (GOOGL) shares fell about 10% after hours on Wednesday, October 28, as third-quarter earnings of $2.12 per share missed the $3.02 consensus and $51.4 billion of quarterly capital spending pushed free cash flow to negative $9.1 billion, renewing questions over the cost of its AI buildout.
Reuters reported the 10% after-hours drop, saying hefty cash burn sent the shares lower, while analysts had expected earnings of $3.02 per share, according to Investing.com. The earnings report came on the same day as Microsoft's quarterly results and the Federal Reserve's rate decision.
Alphabet Q3 Revenue Rises 25% to $127.6 Billion
According to Alphabet's third-quarter release filed with the SEC, consolidated revenue rose 25% to $127.6 billion from $102.3 billion a year earlier. That was roughly in line with the $127.9 billion analysts expected, per Fortune, which cited S&P Global Visible Alpha.
Google Cloud was the standout. Its revenue rose 103% to $30.7 billion from $15.2 billion, and chief executive Sundar Pichai said in the release that the growth was "powered by huge demand for our AI infrastructure and AI solutions." Chief financial officer Anat Ashkenazi said on the call that sales of Alphabet's TPU systems, its in-house AI chips, were also a meaningful contributor to Cloud, as transcribed by Investing.com.
Profit moved the other way. Diluted earnings per share fell to $2.12 from $2.87, and net income dropped to $26.5 billion from $35.0 billion, per the release. Alphabet said an $8.7 billion loss on equity securities reduced net income by $6.7 billion and diluted EPS by $0.55, a hit Fortune described as a paper loss on its equity investments. Operating income still rose to $40.6 billion from $31.2 billion, for an operating margin of 31.8%.
The scorecard below sets the figures in Alphabet's third-quarter release against the consensus estimates reported by Investing.com and Fortune.
| Metric | Q3 2026 | Q3 2025 | Consensus estimate |
|---|
| Revenue | $127.6 billion | $102.3 billion | $127.9 billion (S&P Global Visible Alpha, via Fortune) |
| Diluted EPS | $2.12 | $2.87 | $3.02 (via Investing.com) |
| Google Search & other revenue | $63.4 billion | $56.6 billion | 15% growth expected (via Fortune) |
| Google Cloud revenue | $30.7 billion | $15.2 billion | Not reported |
| YouTube ads revenue | $11.2 billion | $10.3 billion | Not reported |
| Net income | $26.5 billion | $35.0 billion | Not reported |
GOOGL and MSFT Market Data
| Ticker | Close | Daily change |
|---|
| GOOGL | $324.89 | +1.34% |
| MSFT | $531.01 | -0.06% |
Regular-session close on October 28, 2026, New York time. Prices and changes: Yahoo Finance, cross-checked against the closing price on Nasdaq.com.
Alphabet Keeps 2026 Capex Guidance at $195 Billion to $205 Billion
Capital expenditures reached $51.4 billion in the third quarter, up from $24 billion a year earlier, according to Fortune, and free cash flow came in at negative $9.1 billion, per the company's release. Fortune noted that the cash outflow deepened from negative $5.9 billion in the second quarter.
On the earnings call, Ashkenazi held the full-year spending outlook steady, as transcribed by Investing.com:
"Moving to investments, our full year 2026 CapEx guidance range of $195 billion to $205 billion remain unchanged." (Anat Ashkenazi, CFO, Alphabet)
She said the company continues "to expect our CapEx to increase significantly in 2027 and will provide further details on our Q4 call." Ashkenazi tied the cash outflow directly to that spending: "We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx." Free cash flow was $19.7 billion over the trailing 12 months, she said, adding that "the significant increase in our investment in technical infrastructure will continue to weigh on the P&L" through higher depreciation and data center operating costs such as energy.
Why Did Alphabet Stock Fall After Q3 Earnings?
Analysts quoted by Fortune and Reuters pointed to the profit miss, slower Search growth and the cash cost of the AI buildout. Search revenue rose 12% to $63.4 billion, slowing from 17% growth in the second quarter and 19% in the first, while analysts had expected 15%, per Fortune.
"The reason why Alphabet is down is because their traditional revenue service of ad generation has been impacted," Jamie Hannah, deputy head of investments at VanEck, told Reuters. David Wagner of Aptus Capital Advisors told Fortune that Google Cloud did what it was supposed to, adding, "The problem is everything else."
Independent analyst Luke Lango told Fortune that "Alphabet is now funding the AI buildout with shareholders' money instead of its own cash," calling it a "how do we pay for it" problem rather than a "nobody wants it" problem. Dan Ives of Yorkville Ives Equity Research took the opposite view in Fortune's report: "This is the Cloud print we have been waiting for, and in our view it matters more than a lighter Search number."
Nasdaq Futures Drop 1% After Alphabet Results
Alphabet's miss dragged on Wall Street futures, with Nasdaq futures 1% lower in Asian trading on Thursday, Reuters reported. Microsoft (MSFT), by contrast, beat forecasts with better-than-expected cash flows that lifted its shares, according to Reuters. Overnight, the Federal Reserve held interest rates steady as widely expected, but two committee members voted for a hike, Reuters added.
Hannah said both reports still pointed to healthy AI demand: "Both of Alphabet and Microsoft confirmed that the AI revenue generation is still solid."
This article is for education and information only and is not investment advice. Investment decisions are yours to make after your own research.
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