Alphabet shares fall 10% after hours as capex and negative free cash flow overshadow cloud growth

In brief

• Alphabet shares fell about 10% after hours following third-quarter 2026 results that missed forecasts on earnings, free cash flow and search growth.
• Free cash flow turned negative at minus $9.07 billion as capital expenditures reached $51.36 billion in the quarter.
• Cloud revenue more than doubled, while analysts split between target cuts, a downgrade and reiterated Buy ratings.

Earnings miss and a hit from an equity investment

Alphabet reported revenue of $127.58 billion for the third quarter, slightly below the consensus of $128.2 billion (Why is Alphabet stock plunging afterhours today? – Investing.com). Per-share earnings reached $2.12, roughly $0.90 short of the $3.02 that analysts had penciled in. An $8.2 billion unrealized loss tied to the company's stake in SpaceX accounted for part of that gap.

Free cash flow turns negative

The sharpest concern for investors was free cash flow, which slipped into negative territory at minus $9.07 billion. Analysts had projected a shortfall of about $2.70 billion, so the result was far worse than expected. Capital expenditures reached $51.36 billion in the quarter alone. Negative free cash flow now marks a second straight quarter in the company's history. Management also signaled that 2027 capex will climb well past the $195–$205 billion full-year 2026 guidance.

Search slows, cloud accelerates

Search revenue growth decelerated to low double digits and came in below expectations. Management pointed to foreign exchange headwinds and the European Union's removal of its de minimis exemption as contributing factors (Canaccord reiterates Alphabet stock rating on cloud strength – Investing.com). Citizens noted that query growth hit a five-year high, yet monetization proved harder to sustain against tough year-ago comparisons (Citizens downgrades Alphabet stock rating on search growth slowdown – Investing.com). Pivotal Research put search growth at 12% and YouTube ad growth at 9%, with overall advertising up 10.6% (Pivotal Research reiterates Alphabet stock Buy rating on cloud strength – Investing.com).

Cloud was the bright spot. Revenue more than doubled, rising 103% year over year, the sixth straight quarter of accelerating growth and well above Pivotal Research's forecast of 73%. Cloud operating income climbed 210%. Canaccord said cloud backlog grew about 9% sequentially.

Analysts split on the stock

Susquehanna lowered its price target to $400 from $460 while keeping a Positive rating, citing margin pressure (Susquehanna cuts Alphabet stock price target on margin pressure – Investing.com). Canaccord reiterated its Buy rating and $450 target. Pivotal Research kept its Buy rating with a $475 target. Citizens downgraded the stock to Market Perform from Market Outperform. Several firms argued the shares look cheap relative to growth, with a P/E ratio of about 16.3.