Alphabet's Cloud Revenue Doubled to $30.7 Billion, but $51.4 Billion of Capex Left Free Cash Flow at Minus $9.1 Billion
Alphabet's third-quarter release shows Google Cloud revenue up 103% to $30.7 billion, helped by sales of TPU systems, and total revenue up 25% to $127.6 billion. Capital spending of $51.4 billion pushed free cash flow to minus $9.1 billion, a second negative quarter, as long-term debt rose to $125.1 billion. CNBC reported the shares fell about 10% after hours on an earnings miss, with 2027 capex expected to rise significantly.
Alphabet's third quarter showed what an AI build-out looks like when the revenue arrives and the spending arrives faster. Google Cloud revenue more than doubled, to $30.7 billion, yet the company burned cash for a second straight quarter: free cash flow was minus $9.1 billion after $51.4 billion of capital spending, according to Alphabet's earnings release. CNBC reported the shares fell about 10% in extended trading.
Cloud and chips#
Cloud revenue rose 103% from $15.2 billion a year earlier, and its operating income rose to $11.1 billion from $3.6 billion. Alphabet said sales of TPU systems, its in-house AI accelerators sold as hardware, were "a meaningful contributor" to that growth, and its segment notes now say Cloud earns product revenue "primarily from the sale of TPU systems." Inventory on the balance sheet rose to $13.3 billion from $2.4 billion at the end of 2025.
TPU sales put Alphabet in the chip business alongside its cloud rental business. That matters for buyers such as OpenAI, which The Information and Bloomberg reported this week plans to buy Google's AI chips; neither company has confirmed that.
Chief executive Sundar Pichai said in the release that Google's first-party model APIs now process nearly 32 billion tokens a minute and that the Gemini app has reached one billion users. He also said "Gemini 4 Argon and Carbon are now leading at the frontier," a company claim.
The cash#
Total revenue rose 25% to $127.6 billion. CNBC said that was slightly below the $128.22 billion analysts expected and that adjusted earnings of $2.67 a share missed the $3.02 estimate; reported diluted earnings were $2.12.
Operating cash flow was $42.3 billion, short of capital spending. Free cash flow had already turned negative in the second quarter, at minus $5.9 billion. To fund the gap, Alphabet raised $28.7 billion from senior notes and $12.4 billion from at-the-market share sales in the quarter; long-term debt stood at $125.1 billion at September 30, up from $46.5 billion at the end of 2025.
CNBC reported that capex came in below the $55.09 billion analysts expected, that Alphabet kept its 2026 range of $195 billion to $205 billion, and that chief financial officer Anat Ashkenazi said: "We continue to expect our capex to increase significantly in 2027." Meta reported negative free cash flow of its own last week.
Other income swung to a loss of $8.2 billion, driven by an $8.7 billion loss on equity securities, which the release says cut net income by $6.7 billion. CNBC reported that the same category had produced a $99.03 billion gain in the second quarter, driven by Alphabet's stakes in SpaceX and Anthropic.
Limits#
- Adjusted earnings and the consensus figures are CNBC's; Alphabet's release reports GAAP earnings per share only.
- The 2026 capex range and the CFO's 2027 comment come from the earnings call as reported by CNBC; we did not review a full call transcript.
- Alphabet does not disclose TPU system sales separately or name the buyers.
- The release does not say which holdings drove the third-quarter equity loss.