Alphabet shares dropped 7.79% in after-hours trading following the release of Q3 2026 results. The company reported total revenue of $127.6 billion, marking a 25% year-over-year increase, yet falling short of the $127.93 billion analyst consensus. Earnings per share declined by 26% to $2.12.
Google Cloud revenue surged 103% to $30.7 billion, exceeding expectations of $29.15 billion. The unit's profit margin expanded to 36.2% from 23.7% a year prior. Despite this growth, other segments underperformed: Search and other services brought in $63.4 billion, while YouTube advertising revenue reached $11.2 billion.
Capital expenditure for data centers and infrastructure more than doubled, rising 114% year-over-year to $51.4 billion. This spending outpaced operating cash flow of $42.3 billion, resulting in a negative free cash flow of $9.1 billion for the quarter. The company must now rely on savings or debt to cover the shortfall.
Alphabet and four major peers now account for 4.8% of the US investment-grade corporate bond market, compared to 2% a year ago. Federal Reserve Chair Kevin Warsh recently expressed skepticism regarding the resilience of AI investment against rising interest rates, noting that borrowing costs are increasingly impacting the technology sector.
