AI spending outpaces Alphabet's cash generation
Alphabet recorded negative free cash flow of $9.07 billion for the third quarter of 2026, compared with the roughly break-even result analysts had expected, according to Fortune and CNBC. The outflow followed negative free cash flow of $5.9 billion in the second quarter.
Quarterly capital expenditures reached $51.36 billion, versus $24 billion a year earlier. CNBC and Fortune reported that Alphabet left its full-year 2026 spending guidance unchanged at $195 billion to $205 billion. The company also said it expects capital expenditures to top $200 billion in 2026 and exceed $300 billion in 2027.
The financing effort has included both borrowing and an equity sale. CNBC reported that Alphabet's long-term debt rose about 479% over the year, from $21.6 billion to $125.1 billion, as it funded its AI buildout. According to Fortune, this was the first full set of results since Alphabet raised $84.8 billion in equity in June 2026 for that buildout, including $10 billion from Berkshire Hathaway.
Revenue grows, but Search slows and profit falls
Alphabet's revenue increased 25% from a year earlier to $127.58 billion, while adjusted earnings came to $2.67 per share. Analysts had forecast $128.22 billion in revenue and adjusted earnings of $3.02 per share. CNBC, citing LSEG data, said Alphabet had not missed both measures in nearly four years.
Search brought in $63.35 billion, a 12% year-over-year increase, according to Fortune. Its growth rate slowed from 19% in the first quarter and 17% in the second, falling short of analysts' expectation of roughly 15%.
Reported net income declined to $26.17 billion, or $2.12 per share, from $34.98 billion, or $2.87 per share, a year earlier. CNBC and Fortune said an $8.66 billion loss on equity investments, including Alphabet's SpaceX stake, accounted for much of that decline.
Other businesses posted rapid growth. Google Cloud generated $30.7 billion in revenue, up 103% year over year, Fortune and Mitrade reported. Alphabet also said Gemini had reached 1 billion users and was the fastest-growing product in its history, according to CNBC.
Microsoft delivers growth with positive free cash flow
Microsoft beat expectations and its shares gained as strong Azure growth was accompanied by substantial positive free cash flow, Ariva reported.
For the same quarter, Azure revenue reached $33.17 billion, a 48% increase, according to Mitrade and Fortune. Microsoft generated $18.6 billion in positive free cash flow and spent $45.2 billion on capital expenditures, less than its own forecast of roughly $50 billion.
Separate German share quotes
Alongside its report of Alphabet's 10% premarket decline, Ariva listed German quotes showing Class A shares at 258.90 euros, down 2.74%, and Class C shares at 256.25 euros, down 2.95%.
