We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
GOOGL's cloud revenues surged 103% to $30.7B, with a $561B backlog reflecting strong enterprise AI demand.
Alphabet reaffirmed $195B???$205B in 2026 capex as Q3 spending of $51.4B drove negative free cash flow.
Alphabet Inc. (GOOGL - Free Report) emphasized accelerating artificial intelligence (AI) adoption, surging cloud demand and expanding AI monetization during its third-quarter 2026 earnings call. Management highlighted record Google Cloud growth while addressing infrastructure investments and mounting pressure on free cash flow.
Alphabet reported earnings of $2.12 per share, missing the Zacks Consensus Estimate of $2.94. Net revenues of $111.21 billion missed the estimate of $111.8 billion.
Google Cloud revenues surged 103% year over year to $30.7 billion, driven by enterprise AI infrastructure, AI solutions and core cloud services. TPU system sales also contributed meaningfully.
Thomas Kurian, CEO of Google Cloud, highlighted enterprise adoption, noting that nearly 90% of Fortune 100 companies use Gemini Enterprise. Cloud backlog reached $561 billion, with management expecting to recognize just over 55% as revenues within 24 months.
During Q&A, a Bernstein analyst questioned underlying cloud growth excluding TPU sales. Kurian maintained that demand remained strong across cloud services and AI products, although capacity constraints continued limiting potential growth.
Alphabet Expands TPU Sales Beyond Its Cloud
CEO Sundar Pichai emphasized expanding TPU distribution as part of Alphabet's broader AI infrastructure strategy. The company is increasingly offering complete TPU systems to customers operating their own data centers.
Kurian highlighted partnerships involving Oracle and Crux AI, alongside growing demand from AI laboratories, financial institutions and enterprises.
A Barclays analyst questioned TPU profitability and capital intensity. CFO Anat Ashkenazi explained that Alphabet builds inventory against signed customer contracts before recognizing revenues. Kurian added that external deployments broaden distribution while reducing requirements for Alphabet-owned facilities.
GOOGL Faces Rising Infrastructure Spending
Ashkenazi reaffirmed Alphabet's 2026 capital expenditure guidance of $195 billion to $205 billion. She also expects capital expenditures to increase significantly in 2027.
Third-quarter capital expenditures reached $51.4 billion, contributing to negative free cash flow of $9.1 billion.
Management identified infrastructure investment, TPU inventory accumulation and a European Commission fine payment as contributing factors.
Ashkenazi expects higher depreciation and data center operating costs to pressure profitability. Nevertheless, she reiterated expectations for attractive returns on invested capital, supported by monetization opportunities across Alphabet's businesses.
Alphabet Addresses Search Monetization Challenges
Google Search and other advertising revenues increased 12% to $63.3 billion. Pichai highlighted the fastest year-over-year Search query growth in five years, supported by AI-powered experiences.
During Q&A, a JPMorgan analyst questioned the divergence between accelerating query growth and slower advertising revenue growth. Philipp Schindler, Google's chief business officer, attributed the deceleration primarily to foreign exchange effects, advertising dynamics and lower AI Mode monetization.
Schindler explained that Alphabet is expanding advertising within AI Overviews and AI Mode, including international markets. Management remains focused on improving monetization while maintaining user engagement.
GOOGL Advances Gemini and Agentic Commerce
Pichai highlighted the Gemini app reaching 1 billion users and increased adoption of the Gemini 4 model family. First-party model APIs processed nearly 32 billion tokens per minute.
Schindler outlined commercial opportunities through the Universal Commerce Protocol and Universal Cart, designed to facilitate purchases and support retailer relationships.
During Q&A, a Bank of America analyst questioned whether agentic commerce could disrupt traditional Search monetization. Schindler described agentic experiences as additive, emphasizing advertising opportunities within product discovery and purchasing decisions.
Alphabet Maintains Its AI Investment Focus
Ashkenazi expects stronger foreign exchange headwinds in the fourth quarter, particularly affecting Search and YouTube advertising. Tougher year-over-year comparisons will also pressure Search growth.
Google Cloud margins face near-term pressure as Alphabet increases its reliance on third-party computing capacity. Management maintained its emphasis on expanding AI infrastructure, improving monetization and allocating capital through a disciplined long-term framework despite near-term cash flow pressures.
What GOOGL's Zacks Rank and Style Scores Indicate
Alphabet currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term outlook. Its Value Score of C reflects middle-tier valuation characteristics, while its Growth and Momentum Scores of D indicate relatively unfavorable characteristics under those investment styles. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock's VGM Score of D reflects a weaker combination of value, growth and momentum characteristics. Zacks generally favors stocks carrying a Zacks Rank #1 or #2 (Buy) alongside Style Scores of A or B.
Alphabet's current ranking and scores therefore provide limited support for near-term outperformance under this framework. However, the Zacks Rank can change as analysts revise earnings estimates following the recently reported results.
View the Zacks #1 Rank List
Image: Bigstock
GOOGL Q3 Earnings Call Highlights AI Growth and Spending Pressures
Key Takeaways
Alphabet Inc. (GOOGL - Free Report) emphasized accelerating artificial intelligence (AI) adoption, surging cloud demand and expanding AI monetization during its third-quarter 2026 earnings call. Management highlighted record Google Cloud growth while addressing infrastructure investments and mounting pressure on free cash flow.
Alphabet reported earnings of $2.12 per share, missing the Zacks Consensus Estimate of $2.94. Net revenues of $111.21 billion missed the estimate of $111.8 billion.
Alphabet Inc. Price, Consensus and EPS Surprise
Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote
GOOGL Cloud Growth Accelerates on AI Demand
Google Cloud revenues surged 103% year over year to $30.7 billion, driven by enterprise AI infrastructure, AI solutions and core cloud services. TPU system sales also contributed meaningfully.
Thomas Kurian, CEO of Google Cloud, highlighted enterprise adoption, noting that nearly 90% of Fortune 100 companies use Gemini Enterprise. Cloud backlog reached $561 billion, with management expecting to recognize just over 55% as revenues within 24 months.
During Q&A, a Bernstein analyst questioned underlying cloud growth excluding TPU sales. Kurian maintained that demand remained strong across cloud services and AI products, although capacity constraints continued limiting potential growth.
Alphabet Expands TPU Sales Beyond Its Cloud
CEO Sundar Pichai emphasized expanding TPU distribution as part of Alphabet's broader AI infrastructure strategy. The company is increasingly offering complete TPU systems to customers operating their own data centers.
Kurian highlighted partnerships involving Oracle and Crux AI, alongside growing demand from AI laboratories, financial institutions and enterprises.
A Barclays analyst questioned TPU profitability and capital intensity. CFO Anat Ashkenazi explained that Alphabet builds inventory against signed customer contracts before recognizing revenues. Kurian added that external deployments broaden distribution while reducing requirements for Alphabet-owned facilities.
GOOGL Faces Rising Infrastructure Spending
Ashkenazi reaffirmed Alphabet's 2026 capital expenditure guidance of $195 billion to $205 billion. She also expects capital expenditures to increase significantly in 2027.
Third-quarter capital expenditures reached $51.4 billion, contributing to negative free cash flow of $9.1 billion.
Management identified infrastructure investment, TPU inventory accumulation and a European Commission fine payment as contributing factors.
Ashkenazi expects higher depreciation and data center operating costs to pressure profitability. Nevertheless, she reiterated expectations for attractive returns on invested capital, supported by monetization opportunities across Alphabet's businesses.
Alphabet Addresses Search Monetization Challenges
Google Search and other advertising revenues increased 12% to $63.3 billion. Pichai highlighted the fastest year-over-year Search query growth in five years, supported by AI-powered experiences.
During Q&A, a JPMorgan analyst questioned the divergence between accelerating query growth and slower advertising revenue growth. Philipp Schindler, Google's chief business officer, attributed the deceleration primarily to foreign exchange effects, advertising dynamics and lower AI Mode monetization.
Schindler explained that Alphabet is expanding advertising within AI Overviews and AI Mode, including international markets. Management remains focused on improving monetization while maintaining user engagement.
GOOGL Advances Gemini and Agentic Commerce
Pichai highlighted the Gemini app reaching 1 billion users and increased adoption of the Gemini 4 model family. First-party model APIs processed nearly 32 billion tokens per minute.
Schindler outlined commercial opportunities through the Universal Commerce Protocol and Universal Cart, designed to facilitate purchases and support retailer relationships.
During Q&A, a Bank of America analyst questioned whether agentic commerce could disrupt traditional Search monetization. Schindler described agentic experiences as additive, emphasizing advertising opportunities within product discovery and purchasing decisions.
Alphabet Maintains Its AI Investment Focus
Ashkenazi expects stronger foreign exchange headwinds in the fourth quarter, particularly affecting Search and YouTube advertising. Tougher year-over-year comparisons will also pressure Search growth.
Google Cloud margins face near-term pressure as Alphabet increases its reliance on third-party computing capacity.
Management maintained its emphasis on expanding AI infrastructure, improving monetization and allocating capital through a disciplined long-term framework despite near-term cash flow pressures.
What GOOGL's Zacks Rank and Style Scores Indicate
Alphabet currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term outlook. Its Value Score of C reflects middle-tier valuation characteristics, while its Growth and Momentum Scores of D indicate relatively unfavorable characteristics under those investment styles. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock's VGM Score of D reflects a weaker combination of value, growth and momentum characteristics. Zacks generally favors stocks carrying a Zacks Rank #1 or #2 (Buy) alongside Style Scores of A or B.
Alphabet's current ranking and scores therefore provide limited support for near-term outperformance under this framework. However, the Zacks Rank can change as analysts revise earnings estimates following the recently reported results.