Alphabet Inc.
GOOGL10-Q,quarter ended Sep 30, 2026,filed Oct 29, 2026,Original on SEC.gov (opens in a new tab)
3 of 3 checkable figures match the filing, 4 of 4 risk excerpts located in the filing text
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The Print
Alphabet reported third-quarter 2026 revenues of $127.6B, up 25% year over year, with operating income of $40.6B, while net income fell 24% to $26.5B on a swing in other income (expense), net to a $8.2B loss.
The quarter's revenue increase of $25.2B (25%) was attributed by management to Google Cloud growth of $15.6B (103%) and Google Services growth of $9.3B (11%). Cost of revenues rose 24% to $51.4B, which management attributes primarily to increases in inventory and related costs primarily associated with the sale of TPU systems, depreciation expense, TAC, and content acquisition costs largely for YouTube. Operating expenses rose 20% to $35.6B, attributed primarily to increases in employee compensation and depreciation expense, partially offset by a decrease in expenses related to legal and other matters. The bottom line moved the other way: net income available to common stockholders fell $8.8B (25%) as OI&E swung to a $8.2B loss from $12.8B of income.
- Revenues rose 25% YoY to $127.6B, which management attributes to an increase in Google Cloud revenues of $15.6 billion, or 103%, and an increase in Google Services revenues of $9.3 billion, or 11%.
- Operating income increased 30% YoY to $40.6B and operating margin moved from 31% to 32%, while net income available to common stockholders declined 25% to $26.2B and diluted EPS fell to $2.12 from $2.87.
- Other income (expense), net moved to a $8.2B loss from $12.8B of income, which management attributes primarily to net unrealized losses in marketable equity securities largely from SpaceX and decreased net unrealized gains on nonmarketable equity securities largely from a private company.
- Capital expenditures were $51.4B for the quarter and operating cash flow was $42.3B, per the MD&A executive overview.
Results That Matter
- Revenues
- Current period
- $127.6B
- Prior period
- $102.3B
- Change
- +24.7%
Management attributes the increase primarily to Google Cloud revenues up $15.6B (103%) and Google Services revenues up $9.3B (11%). - Income from operations
- Current period
- $40.6B
- Prior period
- $31.2B
- Change
- +29.9%
Operating income rose $9.3B while total costs and expenses rose $15.9B; the MD&A executive overview reports operating margin of 32% versus 31%. - Net income
- Current period
- $26.5B
- Prior period
- $35.0B
- Change
- −24.3%
Net income declined despite higher operating income, as other income (expense), net moved to a $8,221M loss from $12,759M of income. - Net income available to common stockholders
- Current period
- $26.2B
- Prior period
- $35.0B
- Change
- unavailable
The current period deducts $298M of preferred stock dividends following the June 2026 issuance of mandatory convertible preferred stock; the prior period had none. - Diluted net income per common share
- Current period
- $2.12
- Prior period
- $2.87
- Change
- −26.1%
Diluted EPS declined in line with the decline in net income available to common stockholders. - Basic net income per common share
- Current period
- $2.14
- Prior period
- $2.89
- Change
- −26.0%
Basic EPS declined in line with the decline in net income available to common stockholders. - Operating margin
- Current period
- 31.8%
- Prior period
- 30.5%
- Change
- +1.3 ppts
Operating margin widened as operating income grew 29.9% against revenue growth of 25.0%. - Effective tax rate
- Current period
- 18.2%
- Prior period
- 20.5%
- Change
- −2.3 ppts
Management attributes the decrease primarily to lower pre-tax earnings from unrealized losses on equity securities that are deferred tax assets at statutory tax rates, an increase in the foreign-derived deduction eligible income tax deduction, and less non-deductible fines, partially offset by changes in prior period tax positions.
| Metric | Current Period | Prior Period | Change | Investor Takeaway |
|---|---|---|---|---|
| $127.6B | $102.3B | +24.7% | Management attributes the increase primarily to Google Cloud revenues up $15.6B (103%) and Google Services revenues up $9.3B (11%). | |
| $40.6B | $31.2B | +29.9% | Operating income rose $9.3B while total costs and expenses rose $15.9B; the MD&A executive overview reports operating margin of 32% versus 31%. | |
| $26.5B | $35.0B | −24.3% | Net income declined despite higher operating income, as other income (expense), net moved to a $8,221M loss from $12,759M of income. | |
| $26.2B | $35.0B | unavailable | The current period deducts $298M of preferred stock dividends following the June 2026 issuance of mandatory convertible preferred stock; the prior period had none. | |
| $2.12 | $2.87 | −26.1% | Diluted EPS declined in line with the decline in net income available to common stockholders. | |
| $2.14 | $2.89 | −26.0% | Basic EPS declined in line with the decline in net income available to common stockholders. | |
| 31.8% | 30.5% | +1.3 ppts | Operating margin widened as operating income grew 29.9% against revenue growth of 25.0%. | |
| 18.2% | 20.5% | −2.3 ppts | Management attributes the decrease primarily to lower pre-tax earnings from unrealized losses on equity securities that are deferred tax assets at statutory tax rates, an increase in the foreign-derived deduction eligible income tax deduction, and less non-deductible fines, partially offset by changes in prior period tax positions. |
What changed
Quarter over quarter, against the 10-Q for the quarter ended Jun 30, 2026.
Prior 10-QRevenue up 6.5%; Net income down 76.4%
| Metric | Prior | Current | Change | Read as |
|---|---|---|---|---|
| Revenue | $119.8B | $127.6B | +6.5% | Favorable |
| Net income | $112.2B | $26.5B | −76.4% | Unfavorable |
| EPS (diluted) | $9.11 | $2.12 | −76.7% | Unfavorable |
- Revenue+6.5%Prior $119.8B, current $127.6BFavorable
- Net income−76.4%Prior $112.2B, current $26.5BUnfavorable
- EPS (diluted)−76.7%Prior $9.11, current $2.12Unfavorable
▲ and ▼ show the direction of each change. Color and “Read as” show whether that direction is usually favorable for the metric.
Earnings Quality & Cash Conversion
Reported income from operations of $40,576M includes the effect of a $2.1B decrease in expenses related to legal and other matters, which management states largely reflects the effect of a $3.5 billion EC fine accrued in the third quarter of 2025. Net income of $26,468M includes a $8,664M net loss on equity securities within OI&E, versus a $10,734M net gain in the prior-year quarter; for the nine months, the net gain on equity securities was $127,282M, of which $116,316M was unrealized net gain on non-marketable equity securities accounted for under the measurement alternative. The filing does not define an adjusted or ex-item earnings total.
Red flag
Red flag
Red flag
Value Drivers & Capital Allocation
“Cash provided by financing activities consists primarily of proceeds from issuance of debt, proceeds from issuance of equity, and proceeds from the sale of interests in consolidated entities. Cash used in financing activities consists primarily of repayments of debt, net payments related to stock-based award activities, and dividend payments.”
Filing statement
“During the nine months ended September 30, 2026, we issued $45.0 billion of US dollar-denominated senior unsecured notes and $35.8 billion of foreign currency-denominated senior unsecured notes for general corporate purposes, across Sterling, Swiss Franc, Euro, Canadian dollar, Japanese yen, and Australian dollar.”
Filing statement
“On June 5, 2026, the company issued an aggregate amount of 385 million Series A and Series B depositary shares, representing 19 million shares of 6.25% mandatory convertible preferred stock, split evenly into Series A (indexed to Class A stock) and Series B (indexed to Class C stock). Aggregate net proceeds were $19.0 billion which will be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute.”
Filing statement
“During the nine months ended September 30, 2025 and 2026, we spent $63.6 billion and $132.0 billion on capital expenditures, respectively. In 2026, we expect to significantly increase, relative to 2025, our investment in our technical infrastructure, including servers and network equipment and data centers.”
Filing statement
“In April 2025, the company's Board of Directors authorized a $70.0 billion share repurchase program for its Class A and Class C shares. As of September 30, 2026, $69.5 billion remained available for Class A and Class C share repurchases.”
Filing statement
“On June 4, 2026, the company completed an underwritten public offering of 29 million Class A shares at a price of $355.1982 per share and 29 million Class C shares at a price of $351.8018 per share. The net proceeds received by the company were $20.5 billion which will be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute.”
Filing statement
“Concurrently on June 4, 2026, the company completed a $10.0 billion private placement of 14 million Class A and 14 million Class C shares to an affiliate of Berkshire Hathaway Inc.”
Filing statement
Period net income attributable to the parent / period-end equity, not annualized: 3.9% (prior at 2025-09-30: 9.0%); period net income attributable to the parent / period-end assets, not annualized: 2.6%.
Forward Signals
No formal revenue or earnings guidance is provided. The filing states that in 2026 it expects to significantly increase, relative to 2025, its investment in technical infrastructure, including servers and network equipment and data centers, and that it expects existing cash, cash equivalents, short-term marketable securities, and cash flows from operations and financing activities to continue to be sufficient to fund operating activities and cash commitments for at least the next 12 months.
Known trends
- We expect to recognize just over 55% of the revenue backlog as revenues over the next 24 months with the remainder to be recognized thereafter.
- In the second quarter of 2026, we began recognizing revenues from these agreements, with the significant majority to be recognized in 2027.
- As more countries enact these global minimum tax rules, our effective tax rate and cash tax payments could be affected.
Subsequent events
- In October 2026, Waymo entered into a Credit Agreement for a $5.0 billion senior secured term loan that matures in October 2032. The term loan bears interest at a rate equal to Term SOFR plus 5.25% and is secured by certain assets and subsidiaries of Waymo, subject to specified carve-outs. The obligations under the term loan are not guaranteed by Alphabet or any of its other subsidiaries.
Risks
Excerpts are the filing’s own words; each heading is the start of its excerpt. Selected excerpts are not a complete risk inventory.
Adverse rulings in these or related competition proceedings have resulted, and may in the future…
Adverse rulings in these or related competition proceedings have resulted, and may in the future result, in court-ordered remedies that mandate substantial alterations to our commercial agreements, product integrations and functionality, and business models.
These include certain contingent commitments, such as backstops and financial guarantees to support…
These include certain contingent commitments, such as backstops and financial guarantees to support the build-out of third-party data centers and power infrastructure, and contingent repurchase obligations for certain hardware and embedded software at prices below original cost.
AI agents may also be vulnerable to prompt injection, adversarial manipulation, or other novel…
AI agents may also be vulnerable to prompt injection, adversarial manipulation, or other novel attack vectors that could cause them to bypass access controls, disclose sensitive data, or take unauthorized actions.
Furthermore, our current and any future indebtedness, including obligations arising under leases…
Furthermore, our current and any future indebtedness, including obligations arising under leases, backstops, guarantees, and potential liabilities from large commercial agreements, combined with the dilutive impact of current or future equity issuances, could harm our financial condition, depress our stock price or reduce our financial and business flexibility.
4 of 4 excerpts located in the filing text
Balance Sheet & Liquidity
Leverage: Identified debt as of 2026-09-30 (carrying amount): noncurrent long-term debt of $125.1B; current portion of long-term debt of $1.0B. Not separately reported in this filing's standardized data: short-term borrowings. Total debt, net debt and debt-to-equity are therefore not stated.
Liquidity: As of September 30, 2026, the company had $265.1 billion in cash, cash equivalents, and short-term marketable securities, $10.0 billion of revolving credit facilities with no amounts outstanding, and a $25.0 billion commercial paper program with no commercial paper outstanding.
Working capital: Current assets $374.7B vs. current liabilities $134.5B (current ratio 2.79x). Prior reported balance sheet as of 2025-12-31: $206.0B vs. $102.7B (2.01x).
Maturities & covenants
- As of September 30, 2026, we had $10.0 billion of revolving credit facilities, of which $4.0 billion expires in April 2027 and $6.0 billion expires in April 2030. No amounts were outstanding under the credit facilities as of September 30, 2026.
- As of September 30, 2026, we have entered into leases, primarily related to data centers and energy infrastructure, that have not yet commenced with future lease payments of $130.5 billion. These leases will commence between 2026 and 2031 with non-cancelable lease terms between one and 26 years.
- As of September 30, 2026, we had short-term accrued legal and regulatory fines and settlements of $13.8 billion.
Notable Footnotes
| Item | Impact |
|---|---|
| Revenue backlog and related-party agreement with Crux AI | Revenue backlog of $567.7B, of which $560.8B relates to Google Cloud, includes $16.8B associated with a multi-year commercial agreement with Crux AI, an unconsolidated equity method joint venture and related party. |
| SpaceX shares held as marketable equity securities | Marketable equity securities of $90,384M include $75.2B of SpaceX shares subject to short-term restrictions on the ability to sell; OI&E for the quarter reflects net unrealized losses largely from SpaceX. |
| Non-marketable equity securities under the measurement alternative | Carrying value was $128,169M at September 30, 2026 versus $64,094M at December 31, 2025, driven by cumulative upward adjustments of $88,784M; the portfolio primarily consists of one private company. |
| Credit derivatives backing third-party data center obligations | Notional credit derivatives rose to $48,012M at September 30, 2026 from $16,940M at December 31, 2025, representing maximum potential exposure in specified default scenarios, with remaining terms of up to 15 years. |
| EC Android decision and payment | The court-imposed fine and interest of $5.2 billion, previously accrued, was paid in July 2026; the prior-year quarter included a $3.5 billion EC fine accrual that reduced general and administrative expenses comparability. |
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