Alphabet, Google's parent company, reported US$127.6 billion in third-quarter revenue, an increase of 25% year-on-year, as demand for artificial intelligence infrastructure powered record growth in its cloud business.
However, the results released on October 28, 2026, fell short of Wall Street expectations. Revenue missed the US$128.2 billion analyst forecast, while net income declined 25% to US$26.17 billion.
Alphabet shares fell approximately 10% in after-hours trading, reflecting concerns over slower advertising growth and the rising cost of AI infrastructure.
Google Cloud Growth Surges 103%
Google Cloud emerged as the strongest-performing division, generating US$30.71 billion in revenue, more than double the previous year's level and above analyst expectations of US$29.57 billion.
Growth was supported by enterprise demand for AI infrastructure, cloud services and Google's proprietary Tensor Processing Units (TPUs).
The division's order backlog reached US$561 billion, providing visibility into future contracted business, although revenue recognition will depend on delivery schedules and customer usage.
Meanwhile, Google Services revenue increased 11% to US$96.3 billion, supported by 12% growth in Google Search and related activities.
Alphabet Q3 2026: Financial Highlights
Source: Alphabet Q3 2026 earnings release and Reuters.
AI Investment Raises Cash Flow Concerns
Despite the impressive cloud performance, Alphabet reported its second consecutive quarter of negative free cash flow.
Free cash flow reached negative US$9.07 billion, compared with negative US$5.9 billion in the preceding quarter.
The company also expects capital expenditure of US$195 billion to US$205 billion in 2026, with spending projected to rise significantly in 2027.
These investments support data centers, advanced computing infrastructure and AI development, but they also increase pressure on cash generation.
Advertising performance added to investor concerns. Google's advertising revenue reached approximately US$82 billion, below the US$83.4 billion expected by analysts.
The contrasting trends highlight a central question in the AI investment cycle: whether rapid cloud growth can offset infrastructure spending and changes in the economics of traditional search advertising.
What Google's Earnings Mean for ADX-Listed USGRWTH
Alphabet's earnings are particularly relevant to GCC investors holding the Lunate S&P US Shariah Growth ETF (USGRWTH), listed on the Abu Dhabi Securities Exchange.
The ETF tracks the S&P 500 U.S. Shariah Top 30 35/20 Capped Index, providing exposure to a concentrated portfolio of large US growth companies.
According to Lunate's May 2026 factsheet, Alphabet represented a combined 11.80% of the fund's holdings, divided between Class A shares at 6.58% and Class C shares at 5.22%. These historical weights may have changed through market movements and portfolio rebalancing.
Unlike a broad technology index, USGRWTH's concentrated structure means that developments affecting large holdings such as Alphabet can have a meaningful influence on fund performance.
The results also underline the distinction between strong AI demand and attractive shareholder returns. Alphabet's cloud business continues expanding rapidly, but investors are increasingly scrutinizing the costs required to sustain that growth.
For USGRWTH investors, Alphabet's earnings demonstrate both the opportunities of AI-driven growth and the risks associated with concentrated exposure to major US technology companies.
