Alphabet shares fell sharply in after-hours trading on Wednesday, 28 October 2026, after the company reported third-quarter results that showed explosive cloud growth but sharply deteriorating free cash flow. Class A shares traded at $292.50 as of 7:59 pm ET, down 9.97% from the $324.89 close, after dipping to $294.20 earlier in the session.
Revenue for the quarter rose 25% to $127.58 billion, slightly below the roughly $128.2 billion consensus. Google Cloud stood out, with revenue surging 103% to $30.71 billion and operating income of $11.1 billion at a 36.2% margin. However, search and other revenue grew just 12% to $63.35 billion, down from 17% in the second quarter, while YouTube ads rose 9% to $11.21 billion. Diluted EPS fell to $2.12 from $2.87 a year earlier, partly due to an $8.66 billion loss on equity securities that cut EPS by $0.55. Management attributed that loss mainly to the unrealised mark on its SpaceX stake.
The bigger concern was capital spending and cash generation. Alphabet's capital expenditure reached $51.36 billion in Q3, up from $23.95 billion a year earlier, pushing free cash flow to negative $9.07 billion, compared with positive $24.46 billion in the prior-year period. The quarter also included a $5.2 billion payment for a 2018 EU fine and an inventory build of TPU systems. Alphabet sold $28.7 billion of notes, raised $12.4 billion net through an at-the-market share programme, and made no buybacks in 2026. The company maintained full-year 2026 capex guidance of $195 billion to $205 billion, with CFO Anat Ashkenazi saying capex will “increase significantly in 2027”. Cloud backlog was reported at $561 billion, with just over 55% expected within 24 months.
The after-hours drop reflects a market repricing of Alphabet as a builder that must borrow to fund AI infrastructure. Sundar Pichai highlighted that the Gemini AI app passed one billion users and query growth hit a five-year high, but investors are focused on slower search growth, negative free cash flow, and the lack of buybacks. The read-across is mixed: Alphabet's capex plan supports the AI supply chain, while Microsoft rose after hours on a 48% Azure quarter; Amazon was set to report after Thursday's close. Immediate reference levels were $266.50 on the downside, $285–$305 as a base range, and $325 as a bull-case gap-fill target.
