Alphabet Inc.

Alphabet reported Q3 2026 consolidated revenue of $127.6 billion, up 25% year over year in both reported and constant currency. Operating income rose 30% to $40.6 billion, and operating margin was 31.8%. Google Services revenue increased 11% to $96.3 billion, with Search and other advertising revenue up 12% to $63.3 billion, YouTube ads up 9% to $11.2 billion, and subscription/platforms/devices revenue up 11% to $14.3 billion. Google Cloud revenue was $30.7 billion, up 103%, with Cloud operating income of $11.1 billion and margin of 36.2%. Q3 capex was $51.4 billion, operating cash flow was $42.3 billion, and free cash flow was negative $9.1 billion. For full-year 2026, capex guidance remains $195 billion to $205 billion. Management said Q4 revenue will face a slightly larger FX headwind than Q3, Search will continue to lap tougher growth comparisons, Cloud TPU system sales should keep scaling in Q4 with a meaningful revenue ramp in 2027, and Cloud margins will face near-term pressure from third-party compute capacity.

Sundar Pichai framed the quarter as strong and said Alphabet’s full-stack AI approach is driving momentum across the business. He emphasized that newer models are materially improving internal productivity, coding velocity and product innovation, and he tied that progress to a coming step-up in agentic experiences across Search, Gemini, Chrome, Android and Workspace. His tone was optimistic and expansive, with repeated references to a “golden” period ahead as AI capabilities and deployment scale improve.

Anat Ashkenazi said Q3 delivered the 13th straight quarter of double-digit revenue growth and broke down the quarter’s numbers in detail: revenue of $127.6 billion, TAC of $16.4 billion, other cost of revenue of $35.1 billion, operating expenses of $35.6 billion, operating income of $40.6 billion, and operating margin of 31.8%. She said other income and expenses were negative $8.2 billion, mainly due to an unrealized loss on the SpaceX investment, and that operating cash flow was $42.3 billion in Q3 and $179.6 billion trailing 12 months. She highlighted Q3 capex of $51.4 billion, negative free cash flow of $9.1 billion, cash and marketable securities of $265.1 billion, long-term debt of $125.1 billion, and reiterated 2026 capex guidance of $195 billion to $205 billion. She also flagged higher depreciation and data center operating costs ahead, plus Q4 FX headwinds and pressure from lapping stronger Search comps.

Analysts pressed on why Search query growth was accelerating while revenue growth decelerated. Management said FX was the biggest driver, with additional pressure from retail weakness tied to EU de minimis changes, normalization in media and entertainment after a strong Q2, and lower monetization in AI Mode, though they said ad experiments are encouraging and monetization should improve as ads scale more broadly in AI Overviews and AI Mode. Questions also focused on agentic products, with management saying the main hurdles are not just model quality but also efficiency, latency, security, governance and runtime infrastructure; they said enterprise is the first rollout because of its higher trust bar, with consumer rollout planned later. On TPUs, management said they are a platform business with contracts already in backlog, inventory built only after signing agreements, and more revenue expected through 2027 as sales ramp.