Alphabet, the parent company of Google, released its Q3 2026 earnings report on Wednesday, showing weaker-than-expected results that sent its stock (GOOGL: Nasdaq) down 11% in after-hours trading.
Revenue and Earnings Miss
Revenue came in at $127.6 billion, a 25% year-over-year increase and a 6% quarter-over-quarter increase, but below analysts’ estimates of $128.22 billion. Earnings per share (EPS) were $2.12, falling short of the $3.01–$3.02 forecasts. EPS was also down 77% quarter-over-quarter and down 26% year-over-year.
Segment Performance
Google Cloud stood out with 103% growth to $30.71 billion, beating the projected $29.15 billion. However, Search and YouTube ads missed their marks, bringing in $63.4 billion and $11.2 billion respectively, against estimates of $64.99 billion and $11.4 billion. Google Services revenue was $96.3 billion, missing the projected $98.42 billion.
Costs and Cash Flow
Capital expenditures (CapEx) were $51.4 billion, better than the forecasted $55.2 billion. Results were weighed down by heavy AI spending, with Google posting a $7.66 billion operating loss. The company said this capital was directed to scaling AI research and development, including entities like Google DeepMind. A massive $8.7 billion equity loss also reduced EPS by $0.55.
Operating cash flow was $42.3 billion, significantly missing the estimated $52.72 billion. Free cash flow was $9.1 billion, higher than the estimated $2.7 billion. Google paid a dividend of $0.22 per share, up from $0.20 in 2024, and made zero stock repurchases during the quarter.
CEO Comments
CEO Sundar Pichai highlighted progress toward a “half-trillion annual revenue run rate” following yearly revenue growth. He also noted that the Gemini app has reached one billion users, making it the fastest-growing product in Google’s history, and that YouTube Music and Premium surpassed 150 million subscribers globally, including trials.
Stock Reaction
In after-hours trading, Google stock was priced at $289.75, down 10.82%. Its one-year performance remained positive, with gains of 15.42%. Despite the negative reaction, analysts’ average recommendation is a “buy,” with a target price of $426.60.
