Google Stock Q3 2026 Earnings: Revenue Growth, AI Investments, and Stock Valuation
Alphabet, Google’s parent company, reported $127.6 billion in revenue for Q3 2026, an increase of 25% year over year. Google Cloud was the standout performer, with revenue surging 103% to $30.7 billion, driven by demand for AI infrastructure and cloud services. However, lower net income, substantial capital expenditures, and concerns about future profitability weighed on investor sentiment following the earnings release.
This analysis examines Alphabet’s quarterly results, Google Search and YouTube advertising trends, AI infrastructure investments, cash flow, and stock valuation. It also explores the risks investors may want to consider as Alphabet expands its AI capabilities.
Google stock is down over 11% right now after the company just reported
its third-quarter results. So, the market is clearly not liking what it
saw in this report despite Google Cloud growing by over 100%
year-over-year, which is absolutely insane. This also means that Google
stock is now in roughly a 30% correction from its all-time highs, which
means that it is in one of the largest corrections the stock has seen
over the past decade.
I want to go through Google’s Q3 26 earnings results and show you the good and the bad. Now, if you’re someone who’s also been watching my channel for some time, then you’ll probably
know that what I like to do is close my Discord, close my Yahoo Finance,
close everything, and go through the report on my own to generate my own
thoughts and conclusions from the report. Then, I will go and take a
look at how the market responded to see if the market’s response was in
line with what I was thinking.
And when I was going through Google’s earnings report, it started off
very good and then as I continued going through it, I found more and
more things where I was like, “Ooh, snorts the market is probably
not going to like that.” So, in my opinion, there is some justification
for the selloff in after-hours right now. But we are going to discuss if
I think it’s overdone and if I think that Google stock is now looking
cheap. So, with that being said, I am now going to stop rambling and
let’s get into the slideshow of Google’s earnings results.
Google Stock Q3 2026 Earnings: Reports 25% Revenue Growth
All right, so let’s start right from the top here. And we can see that
revenue is up 25% year-over-year to 127.6 billion, which means that
Google’s revenue is continuing to accelerate. Google services revenue
was up 11%, with 12% growth to Google search.
Google Cloud revenue was up 103% though. This is absolutely insane and
Google Cloud’s revenue growth rates are continuing to accelerate. Now,
what is important to note is that TPU sales are being included in Google
Cloud’s revenue now.
And part of the accelerating revenue growth is because there is kind of
a new revenue stream in this number. Overall, Google is at a $500
billion revenue run right now. And Sundar says that the AI investments
are driving surge queries, and they are at all-time highs.
He also shares that Gemini has hit 1 billion users and is the fastest
growing product in Google’s history and YouTube now has over 150 million
paid subscribers now. So overall, Google Cloud is the standout here and
the rest of Google is growing much slower which we are going to get into
later.
Google Stock Q3 2026 Earnings: Operating Income Rises, but Net Income and EPS Decline
Moving on to the next screenshot though, once again we can see that
revenue is up 25% versus 15% topline growth last year.
So, Google’s overall topline is seeing a large acceleration. They also
had $40.6 billion in operating income with a 32% operating margin with
the operating margin expanding year-over-year as well. Operating income
overall is up 30%, too.
However, we can see that net income and earnings per share are down on a
year-over-year basis. The headlines, the analysts, and the market are
not going to like this, but it’s honestly a meaningless metric right
now. Google now has a ton of volatility in its earnings due to
unrealized investment gains.
So earnings are just not a good metric or reflection of the business’s
true profitability.
Google Stock Q3 2026 Earnings: Cash Flow, Capital Expenditure, and Shareholder Dilution
Now with that being said, let’s move on to the cash flow statement. And
what’s interesting is Google’s operating cash flow actually declined in
third quarter on a year-over-year basis by about $6 billion.
But year-to-date, it is still up and it’s now sitting at 127 billion. In
my opinion, the market will not like the decline to operating cash flows
though, especially when Google is investing so much into capex. However,
there is a lot of noise in the cash flows right now too, just like the
earnings.
And also, just like there was a lot of noise in Meta’s cash flow
statement this quarter as well. For example, there was a $1.5 billion
negative hit from accounts receivables, $2.7 billion from a growth of
inventory, $3 billion from an increase of income taxes paid this
quarter, $7.8 billion from other asset investments, and a $9.1 billion
difference in other liabilities. So, Google had headwinds from accounts
receivables, the timing of the company paying its taxes, it building
more inventory, and paying off some debts.
And this is the same story year to date, but year-to- date again the
cash flows are still up. But for the time being, I do think that
operating income might be the cleanest metric to value Google off of.
That said, the business is also free cash flow negative.
And this is another thing that I think the market will not like. It
produced $9 billion of negative free cash flow this quarter and -4
billion year to date. Now, they also stopped their share buybacks
obviously because they have raised $42 billion of cash from dilution so
far this year.
So, Google has started to dilute its shareholders as well because the
business is producing negative free cash flow and it needs additional
cash to continue investing in its AI buildout. So, Google is just like
Meta and Amazon where they’re going free cash flow negative to build out
AI infrastructure. And I think investors should expect this to continue
for the foreseeable future.
Google Stock Q3 2026 Earnings: Google’s Core Businesses and Google Cloud Performance
Moving on, these next screenshots are going to come from the earnings
presentation for this quarter. Once again, we can see 25% revenue
growth, 12% Google search growth, 103% Google Cloud growth, 1 billion
Gemini users, 32 billion tokens per minute, which is up 40%
quarter-over-arter, and has doubled from the first quarter. And again,
Google has 150 million premium YouTube subscribers.
So, the business overall is still growing and the cloud business growth
is incredible. Moving on to the next slide, this one shows that
subscription revenue is up 11% year-over-year. Google network is up 1%,
YouTube ads revenue is up 9% and again, Google search is up 12%.
Now, I consider this collection of businesses and revenues like Google’s
core businesses, and as a whole, they grew 11% year-over-year. Their
growth rates also decelerated to 11% from 14% last year. So, Google,
excluding Google Cloud, is seeing a large revenue deceleration and only
low double-digit growth.
This is another thing that I think the market is not going to like. But
with that being said, the operating margin of the core businesses did
expand to 40.7% and the operating income of this group grew by 16.7%
year-over-year. Moving on to the next slide, this one shows us Google
Cloud’s revenue and operating income.
And as you can see, this business is exploding. Revenue accelerated to
that 103% growth, and the operating margin expanded to 36.2%. This means
that Google Cloud’s operating income grew 28% year-over-year, which is
absolutely insane.
And this slide also shows us that Google Cloud is the main growth driver
behind Google’s entire business.
Google Stock Q3 2026 Earnings: Slowing Growth in Google’s Core Businesses
Now, now I also made some charts of Google’s historical growth rates to
its core businesses with Muse going back to the third quarter of 2025.
So, I went back through every single quarterly report over the past year
to show you just how much Google’s core businesses are decelerating.
Subscription revenues grew 21% last year in the third quarter, and
YouTube ads saw 15% growth. Search revenue also peaked in Q1 at 19%
growth and has now decelerated down to 12%. So, you can clearly see that
Google’s core businesses are slowing down, which is also interesting
because Meta’s business is continuing to see growth rates well above 20%
and sustaining around 25% growth.
So, to me, the fact that Google’s advertising businesses are slowing
down while MetaS are continuing to grow over 25% makes Meta’s earnings
look even better in comparison. This is another chart I made to show the
core slowdown and you can clearly see that since the first quarter of
this year, growth rates have really come down and I think that this is
one of the main things the market is not going to like about this
quarter.
Google Stock Q3 2026 Earnings: Rising Capital Expenditure and Negative Free Cash Flow
Moving on, let’s talk about Google’s capital expenditures.
And here you can see that the capex is also exploding with $51.3
billion of capex this last quarter. And the capex grew 114%
year-over-year, which again caused Google to be free cash flow negative
for this quarter. This next slide shows us the trend of operating cash
flows and free cash flows.
And we can see that operating cash flow is down 13% year-over-year while
free cash flow has gone negative. This again is another thing the market
is not going to like about this earnings report.
Google Stock Q3 2026 Earnings: Google vs. Meta: Digital Advertising Growth
Another thing I do every quarter is track the advertising revenue growth
of Google, Meta, and Amazon.
Amazon obviously reports its earnings tomorrow, so I will include their
numbers in these charts when I make the earnings video for Amazon
tomorrow after the close. By the way, make sure to subscribe to my
channel if you want to see that video. But this first chart is the net
advertising revenue additions per quarter and you can see that Meta is
winning.
Meta added $13 billion in advertising revenue in the third quarter
versus Google’s 7.8 billion. This means Meta is attracting more
advertising dollars than Google and growing faster. Now, I also do the
same thing with the trailing 12 months numbers.
And here you can see that Meta is catching up to Google’s advertising
business. And at this rate, Meta is on track to overtake Google in the
next couple of quarters. This would make Meta officially the largest
digital advertising company in the world.
And again, I think that this is going to happen pretty soon. This next
slide shows us the total advertising revenue growth to these businesses
since the second quarter of 2021 when I started tracking these metrics.
And here we can see that Meta is continuing to grow strong.
Whereas you can see Google’s ad business is decelerating. Meta has had
total growth of 131% versus Google’s 100% since the second quarter of
2021. And again, all of this suggests that Meta’s advertising business
is doing very well. and Google’s report makes Meta’s numbers look even
better respectively.
Google Stock Q3 2026 Earnings: Google Stock Valuation
So now let’s quickly talk about Google’s valuation. Well, in the
trailing 12 months after this report, they have done 157 billion in
operating income. Now this puts Google at around 24.5 times operating
income when we include the 11% drop to the stock in after hours trading.
Now, here, we can see that Google’s long-term median price to operating
cash flow over the past decade is about 24.3, which means that Google is
now back to its historical average price to operating income multiple.
This also means that Google’s premium is pretty much gone now. And if it
can maintain this multiple going forward, then the stock price should
follow the growth of the underlying business and its underlying
operating income.
So personally, I do not think that Google is overvalued here and it’s
now starting to look quite fairly valued in my opinion, especially since
Google Cloud is growing so tremendously.
Google Stock Q3 2026 Earnings: Key Takeaways from the Earnings Call
All right, I just finished listening to the conference call and I do
have some highlights that I quickly want to add in to this video because
Google stock was falling as the conference call was happening. So here
are my quick notes.
The first one says Google said margins will be impacted going forward,
especially in the fourth quarter of this year because they’re using more
third-party compute that did not show up in the Q3 numbers. They also
said the huge infrastructure build will weigh on the profit and loss or
the earnings as depreciation continues to spike from all of their capex
and the AI buildout. They did keep their 2026 capex guide in line, but
then they said that 2027 capex will increase significantly just like
Meta suggested too.
The inventory build this quarter was also for TPUs which hit operating
cash flows especially hard as we discussed. For Q4 revenue, they will
see a larger headwind from currency fluctuations which will specifically
hit YouTube and search even harder. So we could see YouTube and search
growth rates decelerate further into the fourth quarter.
They then said that AI demand is still well ahead of supply and this is
why the company is investing so aggressively in capex and the AI
buildout because they are still leaving revenue on the table. Then
lastly, they said that the AI mode query growth weighed down search
revenue growth, especially since the AI mode monetization is lower than
searches so far. And the market really did not like this or respond well
to it because Google is basically admitting that their AI mode is taking
away from search revenue and profitability.
Google Stock Q3 2026 Earnings: Overall Assessment of Google’s Q3 Earnings
Google Cloud revenue does include TPU sales now though, which is helping
the overall revenue accelerate. Google Cloud is also the growth engine
of Google’s entire business. Now that said, Google’s core legacy
businesses are decelerating and quite rapidly, especially since the
start of this year.
YouTube ad revenue is back to sub 10% growth and search and
subscriptions are also decelerating. This is feeding into the narrative
that chat bots and LLMs are slowing down Google search. In other words,
without Google Cloud, Google’s numbers were actually quite underwhelming
and the market is probably punishing the stock for this.
Meta is also clearly winning in digital advertising and attracting a lot
more advertising revenue. The market will not like that operating cash
flow and earnings are declining, but they’re meaningless right now in my
opinion. Operating income seems to be the best metric to value Google
off of right now.
Overall though, on a net basis, Google’s business is still growing very
well. I mean, again, the revenue grew 25% with operating income growing
30%. And at the same time, I think the premium to the share price is now
gone.
The stock does seem to be fairly valued here at around 24.5 times
operating income, at least in my opinion, especially relative to how the
market has historically valued this business. If you also factor in that
Google’s business is accelerating and arguably becoming more
diversified, then you could make an argument that relative to its
history, it should still be trading for that premium that it was just
over the past 6 months or so. But overall, I do still believe that Meta
and Amazon are cheaper, and my focus is still going to be on buying more
Amazon and Meta in my portfolio rather than adding Google here simply
because I believe those businesses are still offering a lot more value.
But with all that being said, that is going to wrap up my Q3 earnings
summary for Google.Â
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Valuation estimates, interpretations and opinions reflect the analysis presented in the underlying material and are not guarantees of future performance. Investors should conduct their own research and consult a qualified financial adviser before making investment decisions.
