Google Q3 Cloud Business Growth Hits Record 103%, Net Profit Drops 25% Sending Shares Down Nearly 10% After Hours

Early on October 29 (Beijing Time), Alphabet released its Q3 2026 earnings report. Quarter revenue stood at $127.6 billion, up 25% year-over-year, marking the 13th consecutive quarter of double-digit growth. The annualized revenue run rate reached $500 billion, though it was slightly below Wall Street expectations. Google Cloud revenue surged 103% year-over-year to $30.7 billion, setting a record high primarily driven by demand for enterprise AI infrastructure, AI solutions, and TPU-related businesses. This growth accelerated from the 82% rate in the second quarter. Google Services revenue grew 11% to $96.3 billion, with search and other ads revenue increasing 12% and YouTube ad revenue rising approximately 9% to $11.2 billion. Search query volume growth hit a five-year high.

Profitability metrics showed net income attributable to common shareholders at $26.2 billion, down approximately 25% year-over-year, resulting in an EPS of $2.12. This drop was primarily due to an approximately $8.7 billion loss on equity securities investments, compared to substantial gains in the same period last year. Operating income rose 30% year-over-year to $40.6 billion, with the operating margin expanding to 31.8%. The company maintained its full-year capital expenditure guidance between $195 billion and $205 billion, recording negative free cash flow for the quarter. After the earnings release, Alphabet's stock fell 9.84% in after-hours trading, reflecting market concern over revenue and profits slightly missing expectations, slowing ad growth, and cash flow pressures linked to elevated capital expenditures.