Alphabet’s Revenue Jumps 25% to $127.6 Billion, but Profit Falls Amid Rising AI Spending

The company has been spending relentlessly to build A.I. and said it would increase those investments next year. Profit dropped because of changes to the value of its investments.

· Revenue growth: Alphabet, Google’s parent company, reported a 25% year-on-year increase in third-quarter revenue to $127.6 billion, driven by growth in cloud computing and advertising.

· Higher AI investment: The company spent $51.4 billion during the third quarter on data centres and other infrastructure. Its estimated spending for 2026 remains $195–205 billion.

· Spending to rise further: Alphabet’s CFO indicated that AI-related investment would increase significantly in 2027 as the company expands its computing capacity.

· Profit declines: Net profit fell 25% year-on-year to $26.1 billion, partly because of changes in the valuation of investments in SpaceX and other companies.

· Negative free cash flow: Free cash flow fell to negative $9 billion, highlighting the financial pressure from substantial infrastructure investments.

· Google Cloud surges: Cloud revenue more than doubled, rising 103% year-on-year to $30.7 billion, reflecting strong demand for AI computing services.

· Search revenue increases: Google Search generated $63.3 billion in revenue, up 12% year-on-year, although growth was slower than analysts expected.

· Shares decline: Alphabet’s shares fell more than 11% in after-hours trading following the results and concerns about future spending.

· Intensifying AI competition: Google faces competition from OpenAI and Anthropic in AI models, chatbots and autonomous AI agents. It recently introduced Gemini 4 Argon and Gemini 4 Carbon.

· Consumer AI assistant planned: CEO Sundar Pichai said Google was developing an AI-powered consumer agent, with a launch planned for later in 2026.

· Expansion of AI chips: Google reported strong demand for its custom AI chips and announced plans to make them available through Oracle’s cloud business.

· Investor concerns: Investors are questioning whether future AI revenues will justify the enormous costs of data centres, computing infrastructure and chip development.

· Antitrust developments: In September, a federal judge required changes to Google’s advertising technology business but rejected the demand that the company sell parts of that business.

[ABS News Service/29.10.2026]

Alphabet, the parent company of Google, said on Wednesday that it planned to substantially raise its spending on artificial intelligence infrastructure next year, as tech companies face questions about whether such enormous investments are justified.

The Silicon Valley company said it poured $51.4 billion in the third quarter into building data centers, the computing sites that power A.I., and other facets of Google’s business. Its spending estimate of $195 billion to $205 billion for the year remains unchanged, it said.

But 2027 will be a different story, with the company’s A.I. spending set to “increase significantly,” said Anat Ashkenazi, Google’s chief financial officer.

Google also reported that revenue for the three months that ended Sept. 30 rose 25 percent from a year earlier, to $127.6 billion. The growth was driven partly by its cloud business, which leases computing power to other A.I. firms and generated $30.7 billion in revenue, up a whopping 103 percent from a year earlier.

But total revenue fell slightly short of Wall Street estimates, as Google’s spending on A.I. has driven up its costs. The company’s free cash flow — the cash left after paying for expenses and investments — fell to negative $9 billion. And profit was $26.1 billion, down 25 percent from a year earlier, in part because of changes to the value of its investments in SpaceX and other companies.

Google’s shares fell more than 11 percent in after-hours trading.

The financial results and comments about spending add to the tea-leaf reading over Silicon Valley’s artificial intelligence boom, which has entered a tricky moment. Tech giants like Meta continue to spend enormous amounts to build data centers to power the technology, to the point that cash flows are going negative and the companies are selling stock and raising debt for more financing. And Anthropic, a leading A.I. lab, has plans to go public in what could be the largest-ever initial public offering.

Yet investors are questioning whether there will be enough demand for A.I. from consumers and businesses to vindicate all the spending. Some investors recently sold off bonds for the A.I. computing providers CoreWeave and Oracle amid that uncertainty.

Google is a beneficiary and driver of the boom, but it is also contending with the technology’s disruptive power. Demand for its cloud computing has soared, and Google is using A.I. to improve its online advertising business.

At the same time, the company is retooling longtime businesses, like online search, for the A.I. era. Investors have fretted that chatbots from rivals like OpenAI and Anthropic could eat away at search, as users pose questions to chatbots instead of taking their queries to Google.

The company faces continued pressure to remain competitive in the A.I. race. Google’s technology had lagged behind OpenAI and Anthropic in recent months. But last month, it introduced a new A.I. model, Gemini 4 Argon, which scored competitively on benchmarks meant to measure the abilities of A.I. On Wednesday, it released a new version of the model, Gemini 4 Carbon.

Meta and OpenAI recently introduced A.I.-powered personal assistants that can autonomously complete tasks like booking restaurant reservations or planning workouts. Google has added agents to its enterprise products but does not offer a free consumer version like Meta’s Muse.

(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied those claims.)

In a conference call on Wednesday, Sundar Pichai, Google’s chief executive, said the company had a consumer agent in the works. “Later this year we will bring that same experience to consumers,” he said. “It’s clear that the agentic capabilities we have all envisioned are going to be real.”

The company said search generated $63.3 billion in revenue in the third quarter, up 12 percent from a year earlier. Still, that growth was more sluggish than analysts had expected, said Richard Kramer, the managing director of Arete Research.

Mr. Pichai also said there was “strong demand” for the company’s custom A.I. chips “across a wide range of customers.” On Tuesday, Google had said it would begin providing its chips for use in Oracle’s cloud business.

Google avoided a breakup of its online advertising business in September, when a federal judge ruled that the company needed to make changes to address its advertising technology monopoly but did not need to sell off parts of the company. The Justice Department had argued that Google had to break up that business to check its power.