Alphabet Earnings: Cloud Surges as AI Costs Weigh

Alphabet’s third-quarter 2026 revenue rose 25% year over year to $127.6 billion, narrowly missing analysts’ expectations. Operating profit increased about 30% to $40.6 billion, but net income fell 25% to $26.2 billion. Adjusted earnings per share of $2.67 also missed forecasts, partly reflecting an $8.7 billion loss on equity investments that reduced GAAP EPS by about $0.55. Google Cloud was the standout in the Alphabet earnings report: revenue more than doubled to $30.7 billion, with an operating margin of about 36.2%, as demand for AI infrastructure and services grew. Search and other revenue rose 12% to $63.4 billion, while YouTube advertising increased about 9%. Advertising still accounts for roughly 64% of total revenue, keeping attention on the pace of growth in Google’s core business. Spending remains a key concern. Alphabet generated $42.3 billion in operating cash flow but spent $51.4 billion on property and equipment, leaving free cash flow at about negative $9.1 billion, compared with a $5.9 billion outflow in the previous quarter. The company maintained its 2026 capital expenditure forecast of $195 billion to $205 billion and signalled that investment could rise further in 2027. Gemini’s reported one billion users show broad reach, but do not establish revenue or profitability. Alphabet shares fell nearly 10% in after-hours trading at one reported point. For traders, the central question is whether AI-led cloud growth can offset slower search growth and rising infrastructure costs. The results may also shape broader tech-sector sentiment, though they do not directly signal a change in cryptocurrency fundamentals.