Google Cloud sales double as Alphabet capex hits $51 billion

Alphabet said Wednesday that Google Cloud revenue rose 103% to $30.7 billion in the third quarter, more than double the $15.2 billion a year earlier, as the company spent $51.4 billion on property and equipment and its free cash flow fell to negative $9.1 billion.

Total revenue rose 25% to $127.6 billion for the quarter ended Sept. 30, according to the company’s earnings release filed with the Securities and Exchange Commission. Operating income rose 30% to $40.6 billion, for a 31.8% operating margin. Net income available to common stockholders fell to $26.2 billion, or $2.12 a share, from $35 billion, or $2.87 a share, a year earlier.

What’s driving it

Alphabet credited Cloud’s growth to Google Cloud Platform across enterprise AI infrastructure, AI solutions and core services, and said sales of its TPU systems, its custom AI chips, were “a meaningful contributor.” Cloud operating income rose to $11.1 billion from $3.6 billion.

“Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions,” Sundar Pichai, CEO of Google and Alphabet, said in the release. He said the company is on “a half-trillion dollar revenue run rate,” that its first-party model APIs process nearly 32 billion tokens per minute and that the Gemini app has reached 1 billion users.

Google Services revenue rose 11% to $96.3 billion, led by 12% growth in Search and other. The company said Search query growth was the highest in five years.

The profit decline came below the operating line. Alphabet reported an $8.7 billion loss on equity securities, which the release said cut net income by $6.7 billion, compared with a $10.7 billion gain a year earlier.

Why it matters

The spending is now larger than the cash the business generates. Alphabet’s purchases of property and equipment more than doubled from $24 billion a year earlier, while operating cash flow was $42.3 billion, according to the cash-flow statement. Free cash flow, which the company defines as operating cash minus capital expenditures, was negative for a second straight quarter, after negative $5.9 billion in the second quarter. Through nine months, capital spending totals $132 billion.

Alphabet is funding the gap from outside. The release shows $28.7 billion in senior notes and $12.4 billion in stock sold through an at-the-market program during the quarter, and no share buybacks, compared with $11.5 billion in repurchases a year earlier. Long-term debt reached $125.1 billion, up from $46.5 billion at the end of 2025.

Our read: the Cloud numbers show customers are paying for the capacity, including buying Alphabet’s chips outright, and Cloud’s profit roughly tripled. But a company that once paid for its buildout from cash on hand is now borrowing and issuing stock to keep building. That shifts the question from whether AI demand exists to how long the spending can outpace operating cash before returns catch up, a question that also hangs over Oracle’s plan to offer Google TPUs on its cloud.

Who has a stake

Meta reported a similar pattern last week. In its Oct. 21 release, Meta said revenue rose 26% to $64.6 billion, capital expenditures including finance-lease principal were $34.9 billion and free cash flow was negative $2.1 billion. Meta’s results included a $9.89 billion charge tied to a settlement with state attorneys general. It expects 2026 capital spending of $135 billion to $145 billion.

Microsoft also reported Wednesday; its results are in a separate story. Cloud customers, chip suppliers and bondholders all have a stake in whether the spending converts to revenue.

What’s next

Alphabet said more detail will appear in its quarterly 10-Q filing for the period. Amazon reports third-quarter results after the bell Thursday.

Sources: Alphabet third-quarter 2026 earnings release (SEC Exhibit 99.1); Meta third-quarter 2026 earnings release.