Alphabet Down 8% Despite Cloud Sales Doubling; Spending Outpaces Cash

Alphabet shares slid 7.79% in extended trading Wednesday even though Google Cloud sales came in at $30.7 billion, more than double their prior-year level. Capital spending also more than doubled.

Over the quarter, the Google parent allocated $51.4 billion to data centers and other capital projects. That amount exceeded the cash its business generated, leaving free cash flow at negative $9.1 billion.

Cloud Sales and Spending Both Double

Alphabet's results show total revenue up 25% to $127.6 billion. Google Cloud rose 103%, while its profit margin came in at 36.2%, up from 23.7% a year earlier.

Even so, the headline numbers came up short. Revenue was just below the $127.93 billion analysts had looked for. Operating income of $40.58 billion missed the $43.16 billion forecast.

Capital spending climbed 114% from a year earlier, while operating cash flow of $42.3 billion fell short of covering it.

ALPHABET $GOOGL Q3’26 EARNINGS HIGHLIGHTS

🔹 EPS: $2.12
🔹 Revenue: $127.6B (Est. $128.22B) 🔴; +25% YoY
🔹 Google Cloud Revenue: $30.7B (Est. $29.15B) 🟢
🔹 Search & Other: $63.4B (Est. $64.99B) 🔴
🔹 YouTube Ads: $11.2B (Est. $11.4B) 🔴
🔹 CapEx: $51.4B (Est. $55.2B) 🟢

— Wall St Engine (@wallstengine) October 28, 2026

Earnings per share declined 26% to $2.12, and the stock fell to $296.81 after closing at $321.89.

Alphabet's Cash Gap Widens as Warsh Says Rates Are Pressuring Tech

Alphabet's numbers landed hours after Federal Reserve (Fed) Chair Kevin Warsh challenged a common market belief. He doubts AI would remain insulated from higher interest rates.

*WARSH: SKEPTICAL OF THE VIEW INTEREST RATE HIKES WON'T AFFECT AI

— tradfi news (@tradfi) October 28, 2026

He sees the technology complex as already under pressure from rates. Warsh also flagged wider credit spreads—the premium companies pay to borrow relative to US government debt.

The cost of debt has become more consequential for Alphabet. Quarterly spending exceeded operating cash by $9.1 billion, a gap that must be filled from savings or debt.

Big Tech has already made heavy use of bond markets. Alphabet and four peers together now represent 4.8% of the US investment-grade corporate bond market, up from 2% a year earlier.

That data comes from a Bank of Korea report on AI financing, cited by Herald.

This month has already seen heavy AI spenders punished by investors. Oracle lost nearly 9% in a single day after a bond scare at CoreWeave, an AI cloud company.

On the flip side, Alphabet has still generated $19.7 billion in free cash flow during the trailing 12 months. Its cloud arm has also become more profitable than it was a year earlier.

Microsoft, which delivered its report that same evening, advanced after spending came in below expectations. Days earlier, BeInCrypto said investors were up against a no-win test for Big Tech, punishing both higher spending and cuts.