Alphabet Q3: Revenue Misses, Cloud Doubles

Alphabet reported third quarter 2026 revenue of $127.6 billion on Tuesday, a figure that fell short of Wall Street expectations. The company's net income declined 25% to $26.17 billion, resulting in earnings per share of $2.12. Analysts had projected revenue of $128.2 billion and earnings per share of $3.02, according to LSEG data. The lower profit figure included an $8.7 billion net loss on equity securities.

YouTube advertising revenue reached $11.21 billion, marking a 9.2% increase from the same period last year. This growth rate lagged the 15% expansion seen in the prior year and the 13% growth recorded in the second quarter of 2026. Total advertising revenue for Google, which includes YouTube, stood at $80.0 billion, up 10.6% year over year. Philipp Schindler, Google's chief business officer, stated on the earnings call that subscription revenue is now growing faster than advertising revenue.

The YouTube platform surpassed 150 million global subscribers for YouTube Music and Premium, including trials. The company previously crossed the 125 million threshold in March 2025. Schindler also noted that creators upload more than 20 million videos to the site daily. Alphabet disclosed that YouTube subscription revenue exceeded $60 billion in 2025.

Google Cloud drove the top-line growth, with revenue doubling to $30.7 billion. This represented a 103% increase and marked record growth for the division. Sundar Pichai, CEO of Google and Alphabet, said the company is now on a half-trillion dollar revenue run rate. He attributed the momentum to a full-stack approach and noted that AI investments are driving Search query growth.

Pichai announced that the Gemini AI app has reached 1 billion users. He described it as the fastest-growing product in Google's history. During a recent event in New York, the company introduced more than 30 new products for YouTube, including a custom feed feature that allows users to create channels based on requested topics.

Capital expenditures for the third quarter totaled $51.36 billion, a 114% year over year increase. The company raised its full year 2026 capital spending guidance to between $195 billion and $205 billion in July. This adjustment came from a previous projection of $180 billion to $190 billion. CFO Anat Ashkenazi said the company expects capital spending to rise sharply in 2027 as it builds out AI data centers.