Alphabet’s Google Cloud revenue doubles to $31 billion as cash flow stays deep red

Alphabet’s cloud business finally did what bulls had been waiting for. Google Cloud revenue more than doubled in the third quarter to $30.7 billion, and its margin widened to 36.2%. That gave the company some lift against softer growth in Search and YouTube. It did not calm the market.

Alphabet’s shares dropped more than 11% after hours after the results came out, wiping out more than $280 billion in market value. The company posted $127.6 billion in third-quarter revenue, up 25% from a year earlier and roughly in line with analyst estimates. Earnings fell to $2.12 a share from $2.87, with an $8.7 billion paper loss on equity investments doing a lot of the damage.

Search is still huge, but the pace is slowing. Google Search revenue rose 12% to $63.4 billion, down from 17% growth in the second quarter and 19% in the first. Analysts had expected 15% growth. That gap matters because the market is increasingly nervous that AI will chew into the franchise that still pays for everything else.

And everything else is getting expensive. Alphabet said capital spending hit $51.4 billion in the third quarter, up from $24 billion a year earlier. The company held its full-year capex forecast and said spending is expected to reach $200 billion in 2026 and $300 billion in 2027. Free cash flow stayed negative at $9.1 billion, deeper red than the second quarter’s negative $5.9 billion. Sundar Pichai called it a half-trillion-dollar revenue run rate. Investors, judging by the tape, were looking at the checkbook instead.