Alphabet’s numbers, read closely: Cloud revenue doubled, free cash flow went negative, and investors erased about $500 billion in a day

Alphabet’s third quarter showed revenue up 25% to $127.6 billion and Google Cloud up 103%. Capital spending of $51.4 billion pushed free cash flow to minus $9.1 billion, and the stock fell 12.6% on Oct. 29, its worst day on record.

November 1, 2026

Top image: Sundar Pichai, chief executive of Alphabet and Google. Photo: Nguyen Hung Vu from Hanoi, Vietnam / CC BY 2.0 via Wikimedia Commons

By Sasha Venkatram, Technology Reporter

ANALYSIS | What Mountain View’s quarter says about the price of the AI build-out

By most measures, Alphabet had a strong third quarter. The market’s reaction suggests investors were focused on what the company is spending.

The headline numbers

According to the earnings release Alphabet filed with the SEC on Oct. 28:

Revenue was $127.58 billion, up 25% from a year earlier.
Google Search and other revenue was $63.35 billion, up 12%.
Google Cloud revenue was $30.71 billion, up 103%, with operating income of $11.12 billion.
Operating income was $40.58 billion, a 31.8% margin.
Net income was $26.17 billion, or $2.12 per diluted share, compared with $2.87 a year earlier.
Headcount was 204,757.

CEO Sundar Pichai said the company had reached a “half-trillion dollar revenue run rate.” He said search query growth was the highest in five years and the Gemini app had reached 1 billion users, according to the release and the earnings call.

Outside the Googleplex, Alphabet and Google’s headquarters in Mountain View. Photo: David Nagle / CC BY-SA 4.0 via Wikimedia Commons

Where the cash went

Capital expenditures were $51.36 billion in the quarter. Operating cash flow was $42.29 billion, which left free cash flow at minus $9.07 billion, after minus $5.86 billion in the second quarter. Free cash flow for the trailing 12 months was still positive, at $19.75 billion, and Alphabet ended the quarter with $265.1 billion in cash and marketable securities, the filing shows.

To help fund the spending, Alphabet sold about $12.4 billion of stock through at-the-market offerings and issued about $28.7 billion in notes, according to the filing. CNBC reported that the company guided 2026 capital expenditures to $195 billion to $205 billion and said 2027 spending would be more than $300 billion.

A Google data center in Council Bluffs, Iowa. Alphabet spent $51.4 billion on property and equipment in the third quarter. Photo: Chad Davis / CC BY 2.0 via Wikimedia Commons

The market’s verdict

Shares fell 12.6% on Oct. 29, the worst day in the company’s history, wiping out about $500 billion in market value, NBC News reported. JPMorgan analysts called the spending outlook “steeper than expected.”

Executives also discussed the cost of the company’s AI search changes. Chief business officer Philipp Schindler said “the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode.” He said currency moves were the biggest factor in the quarter, according to Search Engine Land.

Why it matters in the Valley

Alphabet is based in Mountain View, and its spending flows to Bay Area chipmakers, equipment suppliers and data-center builders, and its Cloud unit now hosts OpenAI’s models. The quarter showed strong demand for Google’s AI and cloud services, and it showed how much cash the company is spending to meet that demand. Apple, under new CEO John Ternus, reports on Monday, Nov. 2, at 5 p.m. ET (our preview).

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