Alphabet reported $127.577 billion in revenue for Q3 2026, up 25% year over year, when it announced results on October 28. Diluted GAAP earnings per share were $2.12 for the quarter, which ended September 30. Search revenue grew 12%, Google Cloud revenue rose 103%, and free cash flow was negative $9.1 billion as capital expenditures reached $51.4 billion.
Search revenue grew as AI Mode monetization weighed on growth
Google Search and other revenue was $63.350 billion, up 12% year over year. Alphabet said the year-over-year growth rate for Search queries reached a five-year high.
Philipp Schindler, Google’s chief business officer, said foreign exchange was the largest single factor in Search’s growth deceleration from Q2 to Q3. He also cited conditions in specific advertising sectors and lower monetization of AI Mode queries. Some retail advertisers in Asia-Pacific were affected by the European Union’s removal of its de minimis exemption, while media and entertainment spending eased after an unusually strong Q2 associated with the FIFA World Cup.
The high query-growth rate measures Search activity; it does not describe how much revenue each query generates. Schindler said AI Mode’s strong query growth affected Search revenue because those queries were less monetized.
Google Cloud grew 103% and expanded its operating margin
Google Cloud generated $30.709 billion in revenue, up 103% year over year. Operating income was $11.121 billion, and its operating margin reached 36.2%, compared with 23.7% a year earlier.
Alphabet reported a $561 billion Cloud backlog and expected just over 55% of it to be recognized as revenue over the following 24 months. Most of the backlog was tied to typical Google Cloud Platform contracts. Management attributed Cloud growth to AI infrastructure, AI solutions, core GCP services and sales of TPU systems.
Capital spending exceeded operating cash flow
Alphabet reported $42.3 billion in operating cash flow and $51.4 billion in capital expenditures, or CapEx. Free cash flow, the difference between those measures, was negative $9.1 billion.
| Measure | Q3 2026 | Relationship to free cash flow |
| Operating cash flow | $42.3 billion | Starting amount |
| Capital expenditures (CapEx) | $51.4 billion | Subtracted from operating cash flow |
| Free cash flow | −$9.1 billion | $42.3 billion − $51.4 billion ≈ −$9.1 billion |
Alphabet CFO Anat Ashkenazi cited investment spending, a buildup of inventory for TPU-system sales and a $5.2 billion cash payment related to a 2018 European Commission fine as factors in the cash-flow result. For TPU systems, Alphabet signs customer contracts, builds inventory, then delivers and bills for the systems. That sequence places inventory spending before delivery and billing.
Ashkenazi maintained Alphabet’s 2026 CapEx guidance at $195 billion to $205 billion and said spending would increase significantly in 2027.
