Google Cloud revenue more than doubled and total revenue rose 25% to $127.6 billion, slightly below LSEG's consensus. Free cash flow was negative $9.1 billion for a second straight negative quarter, funded by bond sales and $12.4 billion of new stock.
Alphabet's cloud business doubled in the third quarter. The company also needed about $41 billion of outside money to pay for its spending. Early trading suggested investors weighed the second more heavily.
Revenue rose 25% to $127.6 billion, just short of the $128.2 billion analysts polled by LSEG expected. Google Cloud revenue rose 103% to $30.7 billion, and the unit's operating income tripled to $11.1 billion from $3.6 billion. Search and other revenue rose 12% to $63.4 billion and YouTube advertising 9% to $11.2 billion. Total advertising revenue of $82.0 billion was about $1.4 billion below estimates.
"Q3 was a strong quarter for Alphabet," Pichai, the chief executive, said in prepared remarks.
The cash line
Operating income rose 30% to $40.6 billion. Net income fell 25% to $26.2 billion, or $2.12 a share, from $2.87, because of an $8.7 billion loss on equity securities that pushed other income to a loss of $8.2 billion.
The bigger number is cash. Alphabet spent $51.4 billion on property and equipment, up 114% from a year earlier but below the roughly $55.1 billion analysts expected. Operating cash flow was $42.3 billion. That left free cash flow at negative $9.1 billion, after negative $5.9 billion in the second quarter.
How the gap was filled
Alphabet covered the shortfall with outside money. In the quarter it raised about $28.7 billion from senior unsecured notes and $12.4 billion by selling Class A and Class C shares into the market through an at-the-market program, which has $27.6 billion of capacity left. Long-term debt reached $125.1 billion at the end of September, against $46.5 billion at the end of 2025.
For a company long seen as a cash machine, issuing shares to fund spending is a change in posture. The company held its 2026 capital spending forecast of $195 billion to $205 billion, and its finance chief said spending would increase significantly in 2027.
The reaction
Alphabet closed Wednesday at $324.89, up 1.3%. In extended trading it was indicated near $291.50 early Thursday, down about 10%. Microsoft, reporting the same evening, was indicated about 3% higher.
Growth engine or cash drain?
The growth view: cloud revenue doubled and its profit tripled, total revenue grew 25%, capital spending came in below estimates rather than above, and the GAAP earnings decline came from a paper loss on investments rather than the operating business.
The cash view: advertising, still the core of the company, missed estimates; free cash flow is negative for a second quarter and getting worse; the company is now funding growth with debt and share sales; and management has signaled more spending next year, not less.
What to watch
Detail from the earnings call on 2027 capital spending, use of the remaining $27.6 billion equity program, advertising growth against Meta and Amazon, and whether cloud margins hold as third-party capacity costs rise.