Google Cloud doubles revenue while Alphabet spends more on equipment than it earns in cash

Google Cloud revenue rose 103% to $30.7 billion in the third quarter from a year earlier, while Alphabet (Nasdaq: GOOGL) spent $51.4 billion on property and equipment, according to the company's third-quarter results release dated Wednesday, October 28.

What happened

Alphabet's total revenue increased 25% to $127.6 billion in the quarter ended September 30, and operating income increased 30%, giving an operating margin of 31.8%, the release said. Google Services revenue rose 11% to $96.3 billion, with Google Search & other up 12%.

Google Cloud revenue was $30.7 billion, up from $15.2 billion in the third quarter of 2025. Alphabet attributed the growth to Google Cloud Platform (GCP) across enterprise AI infrastructure and enterprise AI solutions, as well as core GCP services, and said sales of TPU systems, its in-house AI chips, were also a meaningful contributor. The release says Google Cloud generates product revenue primarily from the sale of TPU systems.

The segment's operating income was $11.1 billion, compared with $3.6 billion a year earlier. Computed from the release's figures, that is an operating margin of 36.2%, up from 23.7%, and 27.4% of Alphabet's total operating income of $40.6 billion. Cloud accounted for 24.1% of total revenue.

Sundar Pichai, CEO of Google and Alphabet, said in the release: "Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions." He also said the company's first-party model APIs were processing nearly 32 billion tokens per minute, more than four times a year earlier, and that the Gemini app had reached one billion users.

Why it matters

The spending side grew as fast as the revenue. Alphabet's purchases of property and equipment were $51.4 billion in the quarter, up from $24.0 billion in the third quarter of 2025, according to the cash flow statement in the release. That is more than double the year-earlier amount (computed: 2.1 times) and equal to 40.3% of the quarter's revenue (computed).

Net cash provided by operating activities was $42.3 billion, down from $48.4 billion a year earlier. Because capital spending exceeded that figure, free cash flow, which Alphabet defines as net cash from operating activities less capital expenditures, was negative $9.1 billion. It was negative $5.9 billion in the second quarter and positive $10.1 billion in the first quarter. Over the 12 months through September, free cash flow was still positive at $19.7 billion, the release shows.

The release also shows how the spending was financed. Alphabet issued senior unsecured notes for net proceeds of $28.7 billion in the third quarter and sold shares through its at-the-market program for net proceeds of $12.4 billion in total (computed from $4.3 billion of Class A and $8.1 billion of Class C stock). Cash, cash equivalents and marketable securities were $265.1 billion on September 30, compared with $126.8 billion on December 31, 2025.

Outside the two largest segments, "Alphabet-level activities" showed an operating loss of $7.7 billion, up from $4.5 billion a year earlier. The release says these primarily reflect expenses related to the company's shared AI research and development.

What to watch

Alphabet declared a quarterly cash dividend of $0.22 per share on its Class A, Class B and Class C stock, payable on December 14, 2026 to holders of record on December 7, the release said.

The next quarterly cash flow statement will show whether purchases of property and equipment keep exceeding cash from operations, and whether Google Cloud's operating margin holds near the level of the third quarter. The company's quarterly report on Form 10-Q for the period ended September 30 carries the full segment and cash flow disclosures.