Alphabet Falls More Than 10% After Hours as Cloud Revenue Doubles but Free Cash Flow Slides Further Below Zero
Google Cloud hit $30.7 billion, yet a Search slowdown, a $51.4 billion capital bill and a $9.1 billion cash burn sent Alphabet shares sharply lower after the bell.
Wednesday, October 28, 2026/2 min read
Google Cloud more than doubled, and it was not enough. Alphabet's shares fell more than 10 percent to $289.95 in after-hours trading on Wednesday after the third-quarter report, according to Yahoo Finance, as sales and earnings fell short of forecasts and free cash flow dropped deeper below zero.
Revenue for the quarter to 30 September was $127.58 billion, up 25 percent but a shade under the $127.97 billion analysts expected. Earnings were $2.12 a share against roughly $3.01 expected, and an $8.7 billion loss on equity investments cut 55 cents from that figure.
How did Google Cloud and Search perform?
Cloud was the bright spot. Revenue rose 103 percent to $30.7 billion, and Fortune puts its operating margin at 36.2 percent. Chief executive Sundar Pichai said the company is now on a "half-trillion dollar revenue run rate."
Operating income rose 30 percent to $40.6 billion, Fortune said, though that was slightly below the prior quarter. Net income fell to $26.17 billion from $34.98 billion a year earlier, per Yahoo. The National added that the equity-investment swing reversed earlier gains tied to Alphabet's stakes in SpaceX and Anthropic.
Search was the worry. Search and related advertising grew 12 percent to about $63 billion, down from 17 percent growth in the second quarter and 19 percent in the first, against about 15 percent that analysts had pencilled in, Fortune said. YouTube advertising rose 9 percent to $11.2 billion, which Yahoo noted was also below some forecasts. Pichai said the Gemini app has reached 1 billion users.
Why is Alphabet's free cash flow negative?
Capital spending. Alphabet spent $51.4 billion in the quarter, more than double the $24 billion of a year earlier, and free cash flow came in at negative $9.1 billion after negative $5.9 billion in the second quarter. Fortune reports the company expects about $200 billion of capital spending this year, and The National says Bloomberg reported investors are pressing it to show the spending is paying off. Finance chief Anat Ashkenazi said spending will "increase significantly" in 2027, with details due on the fourth-quarter call.
The theme is familiar. Meta also reported negative free cash flow last week, as we covered in our report on its quarter, and the market is now asking each AI spender the same question.
What to watch when Alphabet shares open on Thursday?
Whether the drop of more than 10 percent holds in regular trading is the first test, and it will show how much of the selling was reflex. The second is how analysts split between the cloud numbers, which beat, and the Search slowdown and cash burn, which did not. Microsoft's own report landed the same evening, and we cover it separately.
Published in The Outspoken Digest
Editorial desk
Outspoken Digest Markets DeskReports for The Outspoken Digest across Business, Crypto.
Newsletter
The Digest, in your inbox
One edition, sent when it is ready. No noise, and your address is never passed on.
Read Next
More Business →
Alphabet Heads for Its Worst Day on Record, Shedding About $500 Billion, as Nasdaq Slides
Oct 29, 2026/2 min read
US Economy Grew at a 3.4% Pace in the Third Quarter as AI Spending Lifted Business Investment
Oct 29, 2026/2 min read
Microsoft Rises About 4% After Hours as Azure Grows 48% and Capital Spending Comes In Light
Oct 28, 2026/2 min read
Fed Holds at 3.75% to 4% on a 10-2 Vote as Cook and Hammack Dissent in Favour of a Hike
Oct 28, 2026/2 min read