Alphabet Q3 Results: Google Cloud Soars 103%, Search Hits 5-Year High, But Profit Falls 25%

Alphabet, the parent company of Google, reported a 25% year-on-year increase in revenue for the third quarter of 2026, supported by strong growth in its cloud business and continued momentum in Search advertising. Revenue for the quarter ended September 30 rose to $127.6 billion from $102.3 billion a year earlier, while operating income increased 30% to $40.6 billion.

Alphabet Q3 Results 2026: Revenue Rises 25%, Profit Declines

However, the strong top-line performance did not translate into higher net income. Earnings available to common stockholders declined to $26.2 billion from $35 billion in the corresponding quarter last year, largely due to an $8.7 billion loss on equity securities.

Alphabet's September-quarter performance reflected growth across its core businesses, with Google Cloud emerging as the strongest contributor to expansion. Operating income rose to $40.6 billion from $31.2 billion in the year-ago quarter, taking the operating margin to approximately 31.8%.

Despite the improvement in operating performance, diluted earnings per share fell to $2.12 from $2.87 a year earlier. The decline came even as revenue and operating income increased, underscoring the impact of the loss on equity securities on the company's bottom line.

Google Services continued to account for the largest share of Alphabet's business, generating revenue of $96.3 billion, up 11% year-on-year. Meanwhile, Google Cloud's faster growth strengthened its contribution to the group's overall performance.

Google Cloud Revenue Doubles as AI Demand Accelerates

Google Cloud was the standout performer in Alphabet's third quarter, with revenue jumping 103% year-on-year to $30.7 billion from $15.2 billion. Growth was driven by demand for AI infrastructure, enterprise AI solutions, Google Cloud Platform services and Tensor Processing Units (TPUs), Alphabet said.

The segment also recorded a substantial improvement in profitability. Google Cloud operating income climbed to $11.1 billion from $3.6 billion in the September 2025 quarter, indicating that rising demand for cloud and AI services is contributing to stronger earnings as well as revenue growth.

Alphabet CEO Sundar Pichai said the company was "now on a half-trillion dollar revenue run rate". He also attributed the momentum in Google Cloud to "huge demand" for AI infrastructure and AI solutions.

Google Search Revenue Grows 12% as Queries Reach Five-Year High

Google Search and other revenue increased 12% year-on-year to $63.4 billion. Alphabet said year-on-year growth in Search queries reached its highest level in five years, supported by AI investments and an increase in commercial searches.

YouTube advertising revenue rose to $11.2 billion from $10.3 billion a year earlier. Revenue from Google subscriptions, platforms and devices increased to $14.3 billion, while total Google advertising revenue climbed to $82 billion from $74.2 billion.

Pichai also said YouTube Music and Premium had crossed 150 million subscribers globally, including trials, while the Gemini app had reached one billion users.

Alphabet's AI Spending Weighs on Free Cash Flow

Alphabet's growing AI ambitions are also reflected in its capital expenditure. The company generated $42.3 billion in net cash from operating activities during the quarter, but purchases of property and equipment reached $51.4 billion. As a result, free cash flow turned negative at $9.1 billion for the three months ended September 30.

For the trailing 12 months, Alphabet reported free cash flow of $19.7 billion, while capital expenditure reached $159.8 billion. Research and development expenses increased to $20.6 billion, while the cost of revenues rose to $51.4 billion. Although the operating margin improved from approximately 31% in the year-ago quarter to 31.8%.

The company also raised funds through equity and debt issuance during the quarter. Its at-the-market share program generated net proceeds of $12.4 billion through the issuance of Class A and Class C shares. Alphabet also issued senior unsecured notes, generating net proceeds of $28.7 billion for general corporate purposes.

Google Dividend Alert! Alphabet Declares Quarterly Dividend of $0.22 Per Share

Alphabet's board declared a quarterly cash dividend of $0.22 per share for its Class A, Class B and Class C common stock. The dividend is payable on December 14, 2026, to shareholders of record as of December 7, 2026.

The company also declared dividends on its Series A and Series B mandatory convertible preferred shares.

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