Alphabet Third-Quarter Results Miss Estimates as Capital Spending More Than Doubles

04:58 PM EDT, 10/28/2026 (MT Newswires) -- Alphabet's (GOOG, GOOGL) third-quarter results missed Wall Street's estimates despite artificial intelligence-led cloud revenue growth as capital expenditure more than doubled annually. Revenue increased 25% year-on-year to $127.58 billion, below the FactSet-polled consensus of $127.97 billion for the class C stock and $127.96 billion for the class A listing. Per-share earnings fell to $2.12 from $2.87 a year earlier, while analysts expected $3.01 and $3.02 for class C and A shares, respectively. The Google cloud segment's sales surged 103% to $30.71 billion, driven by growth across enterprise AI infrastructure and solutions, Alphabet said. Last week, BofA Securities projected a strong quarter for Alphabet, driven by accelerating Google cloud revenue. Alphabet's capital expenditure increased 114% year over year to $51.36 billion in the third quarter, bringing the total for the first nine months of the year to $131.95 billion, the company said in a presentation. Alphabet in July lifted this year's capex forecast to between $195 billion and $205 billion from its previous $180 billion to $190 billion estimate, driven by an acceleration in capacity delivery to meet growing demand. The company's free cash flow turned negative year-on-year, at $9.07 billion in the third quarter. FCF was negative $5.86 billion in the second quarter. The company's class A shares were down 9.5% in after-hours trading, while the class C stock declined 9.4%. Investors are increasingly focused on returns as companies spend massive amounts on AI infrastructure. "A company can report excellent profits while spending more cash than it produces," Saxo Bank Investment Strategist Ruben Dalfovo said in a Tuesday note. "Equally, negative free cash flow during an investment phase does not automatically indicate poor long-term returns. "For shareholders, the key is whether future profits eventually justify today's spending." Alphabet competes with Microsoft (MSFT) and Amazon (AMZN) to become an essential provider of AI infrastructure, Saxo Bank said. Google cloud revenue surged 82% in the June quarter, the fastest growth rate of the three, Dalfovo said. Google services revenue increased 11% annually to $96.3 billion in the third quarter, driven by a jump in advertising, Alphabet said. "We think Alphabet remains well positioned to drive outsized advertising and cloud growth given favorable positioning across foundational models, custom silicon, consumer distribution, and enterprise distribution," BofA analyst Justin Post said in a note last week. "As both consumer and enterprise adoption of AI services increases, especially for cloud, it could support more durable revenue growth and a higher valuation." Separately, Microsoft reported better-than-expected first-quarter results late Wednesday. E-commerce giant Amazon.com is scheduled to release its financials Thursday.