Alphabet Shares Fall as Q3 Revenue and Free Cash Flow Miss Forecasts

Alphabet shares dropped more than 7% after the Google parent reported third-quarter results on Wednesday, October 28, 2026, that fell short of several Wall Street forecasts. Revenue reached $127.58 billion, while advertising sales and free cash flow missed expectations, intensifying investor scrutiny of the company's artificial intelligence investments and the growth outlook for its core search business.

According to earnings figures reported by CNBC and Yahoo Finance, Alphabet generated $127.58 billion in revenue, up 25% from a year earlier. Analysts surveyed by LSEG had expected $128.22 billion, according to CNBC, while Yahoo Finance cited a consensus estimate of $127.93 billion. Earnings per share came to $2.12, compared with an analyst forecast of $3.01 reported by Yahoo Finance. CNBC cited a $3.02 estimate but said comparability with the reported figure was unclear.

Free cash flow fell to $9.07 billion, substantially below the $2.70 billion analysts had expected, according to CNBC. Operating income totaled $40.58 billion, missing FactSet's $43.19 billion forecast. Revenue excluding traffic acquisition costs reached $111.21 billion, slightly below Wall Street's $111.29 billion estimate, Yahoo Finance reported.

Advertising remained a significant source of pressure. Google's advertising segment recorded $82.01 billion in sales, below the $83.5 billion analysts had projected, according to Yahoo Finance. Search revenue totaled $63.35 billion, missing the $64.96 billion analyst estimate cited by CNBC.

Google Cloud delivered a stronger result, generating $30.71 billion in revenue against analyst expectations of $29.1 billion, according to Yahoo Finance. The division's reported growth rate reached 103%, highlighting demand for cloud infrastructure even as advertising performance fell short of forecasts.

Alphabet also reported that its Gemini app had reached 1 billion users, describing it as the fastest-growing product in the company's history, according to CNBC. The milestone comes amid intensifying competition among technology companies seeking to expand their AI products and infrastructure.

The earnings report followed Google's unveiling of a new artificial intelligence model, Gemini 4 Carbon, earlier that day. According to Yahoo Finance, Google claimed the model outperformed its Gemini 4 Argon model, released two weeks earlier, as well as competing systems from OpenAI and Anthropic. Those performance comparisons were company claims reported by the outlet.

Investors have continued to weigh the potential returns from large-scale AI spending against the financial risks of building the computing infrastructure needed to support the technology. Yahoo Finance reported that concerns about CoreWeave's debt burden had contributed to a sell-off in its shares the previous week, sending pressure across broader markets.

Google's infrastructure strategy also received a boost on Tuesday, when Oracle announced it would become the first company to purchase Google's AI processors for use in its own data centers, according to Yahoo Finance. The agreement points to a potential external market for Google's specialized computing hardware beyond its own services.

Competition in online search and digital commerce is another concern for investors. Meta CEO Mark Zuckerberg said 10 million people had set up Meta's new Muse AI agent, with most users accessing it for shopping, Yahoo Finance reported. Wider adoption could create additional competitive pressure on Google's search and advertising businesses.

In a comment cited by Yahoo Finance, Post highlighted the implications of the new product for Google's search business.

"Search usage [and] growth is back in focus given Muse launch and challenges Google could face in migrating users to agentic while maintaining strong monetization," Post said.