Alphabet's third-quarter 2026 results, released Wednesday, 28 October, showed total revenue up 25% to $127.6 billion and Google Cloud revenue more than doubling to $30.7 billion. In the earnings release, the company described TPU system sales as "a meaningful contributor to revenue growth" — a notable statement from a company that has historically built its custom AI chips for internal use.

The Numbers

Per the official earnings release:

  • Total revenue: $127.577 billion, up 25% year-over-year — the 13th consecutive quarter of double-digit growth
  • Google Services: $96.3 billion, up 11%, with Search & other up 12% to $63.4 billion
  • Google Cloud: $30.7 billion, up 103% year-over-year
  • Operating income: $40.6 billion, up 30%, with a 31.8% operating margin
  • Google Cloud operating income: $11.1 billion, versus $3.6 billion a year earlier
  • Net income: $26.2 billion; earnings per share $2.12, versus $2.87 in the year-ago quarter
  • Other income (expense): a $12.8 billion gain in 2025 swung to an $8.2 billion loss this quarter

The release also reports that query volume grew "at the highest rate in the last 5 years." CEO Sundar Pichai cited "an annualized revenue run rate of $500 billion."

TPU Systems

The part of the report that drew the most attention was the company's own AI chips. The Cloud section of the release states explicitly that "TPU system sales were also a meaningful contributor to revenue growth." On the earnings call, management described TPU systems as a combination of hardware, system software, compilers, and optical networking — "much more than just a chip" — and cited a Cloud backlog of $561 billion, most of it typical GCP contracts. Management added: "In Q4, we expect TPU system sales to continue to scale, and we see a meaningful revenue ramp in 2027."

The AI Push

Pichai laid out the scale of the company's AI build-out in the release: first-party model APIs are "now processing approximately 32 billion tokens per minute, more than 4x the level we were processing a year ago," and the Gemini app has "reached 1 billion users — making it the fastest-growing product in Google's history." YouTube Music and Premium subscriptions passed 150 million.

Market Reaction

Despite the record Cloud quarter, the stock sold off. According to analysis cited by CNBC, the report marks the first double miss — EPS and revenue both — since Q4 2022. Shares were down over 10% in premarket trading on Thursday, 29 October, and CNBC noted that a full-session drop above 9.77% would be the worst post-earnings decline in Alphabet's history. D.A. Davidson's Gil Luria told CNBC: "This may be the quarter we feared," pointing to Search, which missed revenue forecasts for the second straight quarter.

Spending remains the backdrop. The company reported Q3 capital expenditure of $51.4 billion and guided full-year 2026 capex to $195 billion to $205 billion, with 2027 spending expected to "increase significantly."

Sources