Alphabet, Google's parent company, reported third-quarter 2026 revenue of $127.6 billion on Wednesday (Oct. 28), after the U.S. market closed, up 25% from a year earlier. Advertising, however, fell short of projections: ad revenue totaled $82 billion, versus the $83.4 billion analysts expected, according to LSEG data cited by Reuters. Shares fell about 10% in after-hours trading and opened Thursday (Oct. 29) down nearly 12%.
By segment, Google Search and other ad revenue came to about $63.3 billion, up 12%, and YouTube advertising reached $11.2 billion, up 9%. Google Cloud, the cloud computing division, was the standout, with $30.7 billion in revenue, more than double the year-earlier period. Operating income rose 30% to $40.6 billion, but net income fell 25% to about $26.2 billion because of multibillion-dollar losses on stakes in other companies, recorded outside operations.
The market also reacted to the pace of artificial intelligence spending. The company kept its 2026 capital expenditure forecast at $195 billion to $205 billion, and Chief Financial Officer Anat Ashkenazi indicated the figure should rise significantly in 2027. According to Reuters, free cash flow for the quarter was negative by about $9.1 billion, while analysts had expected roughly breakeven. According to Meio & Mensagem, Alphabet, Microsoft, Amazon and Meta are together expected to invest more than $700 billion in AI by the end of 2026. Microsoft, which reported results the same day, saw its shares rise more than 5%.
What changes for businesses
For advertisers, the key figure is the slowdown in search, Google Ads' main showcase. According to Meio & Mensagem, citing Reuters, Alphabet Chief Business Officer Philipp Schindler linked slower search ad growth to greater use of AI Mode, the search mode in which Google answers with AI-generated text. In practice, some queries are now answered by the tool itself, which changes where ads appear and how users reach websites. For companies that rely on organic search traffic, the shift could also affect site visits, since the answer appears before the links.
Meio & Mensagem also reports that ads inside AI Mode started in markets such as Australia, Canada, India and Singapore and are expected to reach Brazil, Mexico and the United Kingdom in the fourth quarter of 2026. If confirmed, the format could change how search campaigns are planned in Brazil this year-end, the Black Friday and Christmas season. On YouTube, connected TV accounts for 33% of the platform's ad revenue, according to the same publication, underscoring the weight of the big screen in video campaigns.
“Investors need to see search accelerating, not decelerating”
— Dave Wagner, portfolio manager at Aptus Capital Advisors, to Reuters (translated from Portuguese)
For its part, Chief Executive Sundar Pichai called it a strong quarter and said annual query volume is growing at its fastest pace in five years, according to the transcript published by Investing.com. Alphabet also said its Gemini app, its AI assistant, has reached 1 billion monthly users, according to Mundo Conectado.
What to watch next
- The arrival of AI Mode ads in Brazil, expected in the fourth quarter.
- Cost-per-click and search volume trends in Black Friday and Christmas campaigns.
- Details of Alphabet's AI investment plans for 2027.
- The company's next earnings report, for the fourth quarter, expected in early 2027.
