Alphabet reports strong revenue growth

Alphabet, the parent company of Google, reported a 25% increase in revenue for the third quarter of 2026, reaching $127.6 billion. Despite this, the company's stock dropped 11% in after-hours trading as investors reacted to several concerns.

Investors react to financial warnings

Investors were concerned about slowing growth in the search business, negative cash flow, and future commitments exceeding $1 trillion. Net earnings per share fell from $2.99 to $2.12, primarily due to an $8.7 billion loss from stock investments, mostly related to SpaceX.

Alphabet faces cash flow challenges

Alphabet’s available cash flow was -$9.1 billion in the third quarter of 2026, marking the second consecutive quarter of negative cash flow. In June 2026, the company raised $84.8 billion in equity capital, including $10 billion from Berkshire Hathaway, to fund its artificial intelligence expansion.

Google Search growth slows

Google Search generated $63.4 billion in the third quarter, but its growth slowed to 12%, down from 17% in the previous quarter and 19% in the first quarter. Analysts had expected 15% growth, making the slowdown more disappointing.

AI features affect advertising revenue

Advertising remains the primary source of revenue for Alphabet, but new artificial intelligence features are causing an unexpected cannibalization effect. AI mode queries are three times longer than traditional searches but generate less monetization, as users receive answers directly in the AI interface, reducing clicks to advertising sites.

Google Cloud shows strong performance

Google Cloud reported $30.7 billion in revenue for the third quarter of 2026, up 103% year-on-year. The division’s operating margin reached 36.2%, transforming it into a major profit driver for Alphabet.

Google Cloud supports rivals

Sundar Pichai, CEO of Alphabet, noted that the API of proprietary models now handle 32 billion tokens per minute, up 40% from the previous quarter. However, Google Cloud’s major clients include Anthropic and other AI startups that directly compete with Google in the generative model market.

YouTube and new services grow slowly

YouTube showed modest 9% growth in advertising revenue, while other Alphabet divisions progressed without fanfare. The Gemini app reached 1 billion users and is the fastest-growing product in Google’s history, but monetization of these new services remains insufficient to offset massive investments.

Alphabet invests heavily in infrastructure

Alphabet’s capital expenditures reached $51.4 billion in the third quarter of 2026. The company plans to invest $200 billion in 2026 and $300 billion in 2027, mainly in data centers and artificial intelligence infrastructure. Total future commitments exceed $1 trillion.

Investors question return on investment

Anat Ashkenazi, Alphabet’s chief financial officer, justifies these expenditures as necessary to maintain technological leadership, but investors question the return on investment. Microsoft cuts jobs to fund its AI pivot, highlighting the tough trade-offs in the sector.

AI queries challenge monetization

AI mode queries generate three times more processed data than traditional searches but produce lower advertising revenue. Users receive synthetic answers without clicking on ads, making it difficult for Alphabet to transform technological innovation into tangible profits.

Shareholders question the future

The central question for Alphabet shareholders is whether the company can justify $1 trillion in commitments if AI monetization remains problematic. The 11% drop in after-hours trading reflects growing skepticism.

Google Cloud cannot alone support valuation

Google Cloud offers a solid outlook with its 103% growth, but cannot alone support the valuation of a $2,000 billion market capitalization group. The slowdown in Google Search to 12% sounds like a warning: the historical model is fading.

Future quarters will determine Alphabet’s success

The upcoming quarters will determine if Alphabet can transform its massive investments into sustainable value creation or if the group will continue to destroy cash to fund a technological race with uncertain returns. For now, the markets have ruled: growth without profitability is no longer enough.