On October 28, 2026, Alphabet reported net income available to common stockholders of $26.2 billion for the third quarter, and negative free cash flow of $9.1 billion. Operating cash flow fell 13% to $42.3 billion even as operating income rose 30%, while purchases of property and equipment more than doubled to $51.4 billion, equal to 121% of the cash the business generated. It was the second negative quarter in a row. Trailing twelve-month free cash flow dropped 73% to $19.7 billion. Alphabet covered the gap and more with $28.7 billion of new notes and $12.4 billion of new shares, bought back no stock, and ended September with total assets of $1,003.3 billion, against $595.3 billion at the end of 2025.

In Short

Alphabet made a profit of $26.2 billion in three months, but it spent even more cash than its businesses brought in, mostly on data centres, servers and chips for AI. To pay for that, it borrowed money and sold new shares instead of buying shares back as it did a year ago. It plans to spend even more in the last three months of 2026, so the question is how long it keeps paying for AI with borrowed money and new stock rather than with cash from Search, YouTube and Cloud.

Profit up, cash down

Alphabet's third-quarter results, published on October 28 for the quarter ended September 30, 2026, show two trends moving in opposite directions. Operating income rose 30% to $40,576 million. Net cash provided by operating activities fell 13% to $42,290 million, from $48,414 million a year earlier.

Net income was lower too, at $26,468 million against $34,979 million, but most of that fall was not cash. An $8,664 million loss on equity securities reduced reported profit; the cash flow statement adds $9,048 million of securities losses back. A year earlier, the reverse had happened, with $10,855 million of securities gains stripped out.

The bigger driver was working capital. Changes in assets and liabilities consumed $17,428 million of cash in the third quarter of 2026, against a contribution of $3,783 million a year earlier, a swing of $21.2 billion, PPC Land's calculation. The largest items were a $7,807 million increase in other assets, a $3,917 million increase in accounts receivable, $3,702 million of net income tax payments, and a $3,220 million build in inventory. Accrued expenses and other liabilities, which added $8,078 million to cash in the third quarter of 2025, subtracted $1,168 million. Deferred revenue was the only meaningful positive, adding $2,551 million.

Inventory is the line that has changed most in 2026. It stood at $2,439 million at the end of 2025 and $13,308 million at September 30, 2026, after $10,959 million of cash went into inventory in the first nine months. The release does not explain the build. It does describe Google Cloud as generating "product revenues primarily from the sale of TPU systems," Google's own AI chips sold as complete systems, and states that "TPU systems sales were also a meaningful contributor to revenue growth" in the quarter.

Non-cash charges added back to profit rose as well. Depreciation of property and equipment was $8,369 million, up 49% from $5,611 million, and stock-based compensation was $8,630 million, up from $6,368 million.

Over nine months, operating cash flow is still growing. It reached $127,149 million, 13% more than the $112,311 million of the first nine months of 2025.

Capital expenditure: $51.4 billion in a quarter

Purchases of property and equipment were $51,355 million, up 114% from $23,953 million. Alphabet's earnings presentation charts five quarters, each above the one before:

Quarter Capital expenditure Year-over-year growth
Q3 2025 $23,953m +83%
Q4 2025 $27,851m +95%
Q1 2026 $35,674m +107%
Q2 2026 $44,924m +100%
Q3 2026 $51,355m +114%

Capital spending equalled 40.3% of revenue in the quarter, against 23.4% a year earlier, PPC Land's calculation. It also exceeded the $39,157 million operating income of Google Services, the segment that includes Search, YouTube and Network, by about $12.2 billion.

The scale has moved quickly. In June 2025, PPC Land reported a 2025 plan of $75 billion. By October 2025, Alphabet had raised its 2025 range to $91 billion to $93 billion. In February 2026 it guided 2026 to $175 billion to $185 billion, with about 60% for servers and 40% for data centres and networking. In July it raised the range to $195 billion to $205 billion and said spending would rise significantly again in 2027.

Spending for the first nine months of 2026 totals $131,953 million, more than double the $63,596 million of the same period of 2025. Reaching the July range would require $63.0 billion to $73.0 billion in the fourth quarter, PPC Land's calculation. Alphabet's release, earnings presentation and Sundar Pichai's published remarks contain no updated guidance for 2026 and no figure for 2027.

Pichai's remarks explained the spending in terms of demand. "Our AI infrastructure and solutions are the major drivers for Cloud growth and our customers see us as the leading provider here, so there's huge demand," he said. "We are working hard to bring more capacity online to meet this long-term demand."

Capital spending also becomes future cost. Depreciation of $8,369 million in the third quarter equals 16% of that quarter's capital expenditure, PPC Land's calculation. As the assets bought in 2026 enter service, depreciation will rise, which is what chief financial officer Anat Ashkenazi described in July when she warned of modest margin pressure in the near term as the new capacity is used.

Free cash flow: two negative quarters

Alphabet defines free cash flow as operating cash flow minus capital expenditure. Its reconciliation shows how the measure has moved over eight quarters:

Quarter Operating cash flow Capital expenditure Free cash flow
Q4 2024 $39,113m $14,276m $24,837m
Q1 2025 $36,150m $17,197m $18,953m
Q2 2025 $27,747m $22,446m $5,301m
Q3 2025 $48,414m $23,953m $24,461m
Q4 2025 $52,402m $27,851m $24,551m
Q1 2026 $45,790m $35,674m $10,116m
Q2 2026 $39,069m $44,924m -$5,855m
Q3 2026 $42,290m $51,355m -$9,065m

When Alphabet reported the second quarter, several financial publications described the negative $5.9 billion as the first negative quarter in Alphabet's history as a public company. The third quarter is larger. Operating cash flow rose 8% from the second quarter, but capital spending rose by $6.4 billion.

On a trailing twelve-month basis, free cash flow was $73,552 million at the end of September 2025, $73,266 million at the end of 2025, $64,429 million in March, $53,273 million in June and $19,747 million in September. Over the twelve months, operating activities generated $179,551 million and capital spending absorbed $159,804 million.

For the first nine months of 2026, free cash flow was negative $4,804 million, against positive $48,715 million in the same period of 2025, PPC Land's calculation. Alphabet generated $73.3 billion of free cash flow in 2025 as a whole.

Whether 2026 ends in negative territory depends on the fourth quarter. Operating cash flow has not exceeded $52,402 million in any of the eight quarters shown, while the July guidance implies at least $63.0 billion of fourth-quarter capital spending. On those two figures alone, a third negative quarter would follow unless operating cash flow rises well above its recent range or spending comes in below guidance.

Where the money came from

The cash flow statement shows how the gap was filled. In the third quarter, Alphabet received $28,996 million from new debt, net of costs, and repaid $3,626 million. It received $12,371 million from issuing common stock. Net cash provided by financing activities was $29,437 million, against a net outflow of $18,383 million a year earlier.

The release gives the detail. During the quarter, Alphabet issued 12 million Class A shares for net proceeds of $4.3 billion and 24 million Class C shares for $8.1 billion through its at-the-market programme, with $27.6 billion still available under it. It also issued senior unsecured notes for net proceeds of $28.7 billion, "to be used for general corporate purposes."

The programme dates from June, when Alphabet announced about $85 billion of equity financing, including a $10 billion investment from Berkshire Hathaway, a public offering and a $40 billion at-the-market programme expected to begin in the third quarter.

Across the first nine months of 2026, the external funding adds up as follows, PPC Land's calculation from the cash flow statement:

  • Debt: $85,222 million raised and $8,879 million repaid, a net $76,343 million.
  • Common stock: $42,870 million.
  • Mandatory convertible preferred stock: $19,063 million.
  • Sale of interests in consolidated entities: $3,758 million.

That is $142.0 billion in nine months, more than the $132.0 billion Alphabet spent on property and equipment over the same period. A year earlier, financing activities were a net outflow of $44,416 million, mostly buybacks; in 2026 they were a net inflow of $115,757 million.

The cost of the new capital

Long-term debt stood at $125,102 million at September 30, against $46,547 million at December 31, 2025, and $98.2 billion at the end of June. Interest expense in the quarter was $967 million, up from $143 million a year earlier. Interest income, at $1,768 million, still exceeds it.

The preferred stock carries a 6.25% dividend. Alphabet recorded $298 million of preferred dividends in the third quarter and $384 million so far in 2026. In October, the board declared a quarterly dividend of $15.63 per preferred share, payable on November 15 to holders of record on November 1. On the common stock, the board declared $0.22 per share, payable on December 14 to holders of record on December 7. Dividend payments on preferred and common stock together were $2,936 million in the quarter.

Where the money went

Alphabet did not spend all of the new capital. Cash, cash equivalents and marketable securities rose from $126,843 million at the end of 2025 to $265,098 million at September 30, an increase of $138.3 billion, PPC Land's calculation. In June, the figure was $242.5 billion.

Beyond capital spending, the largest uses of cash in 2026 were acquisitions and investments in private companies. Alphabet spent $34,103 million on acquisitions and intangible assets in the first nine months, against $1,425 million a year earlier, and goodwill rose from $33,380 million to $58,117 million. It bought $24,160 million of non-marketable securities, against $3,312 million. The release does not name the companies involved.

Non-marketable securities on the balance sheet nearly doubled, from $68,687 million to $135,230 million, reflecting both purchases and valuation gains. Those gains have swung reported profit sharply in 2026: other income of $37.7 billion in the first quarter, a $77.1 billion equity gain in the second, and an $8.7 billion loss in the third. Alphabet does not name the holdings behind those figures. When Anthropic filed for its initial public offering, PPC Land noted that Alphabet's filings do not attribute the gains to Anthropic, whose filing shows at least $114.5 billion of compute commitments to Google Cloud running from April 2026 to July 2033.

No buybacks, more shares

Alphabet repurchased no stock in the third quarter, against $11,504 million a year earlier, and none in the first nine months of 2026, against $39,810 million in the same period of 2025. In the third quarter of 2025, buybacks and dividends returned $14.0 billion to shareholders. In the third quarter of 2026, Alphabet paid $2.9 billion in dividends and raised $12.4 billion from new common shares, a net inflow of $9.4 billion from shareholders, PPC Land's calculation.

The share count has moved accordingly. Class A, B and C shares outstanding rose from 12,088 million at the end of 2025 to 12,294 million at September 30, an increase of 206 million, or 1.7%. The diluted share count used for third-quarter earnings per share was 12,368 million, against 12,203 million a year earlier. Net payments related to stock-based awards, which cover tax withholding on employee shares, took $5,368 million of cash in the quarter and $17,424 million over nine months.

A $1 trillion balance sheet

Total assets reached $1,003,312 million at September 30, against $595,281 million at the end of 2025. Property and equipment, net of depreciation, rose from $246,597 million to $372,827 million. Total liabilities rose from $180,016 million to $325,763 million, and stockholders' equity from $415,265 million to $677,549 million, lifted by retained earnings that include the year's equity gains and by the new share issues. Accounts payable rose from $12,200 million to $21,975 million.

How Alphabet compares with Meta and Microsoft

Alphabet is not alone among the hyperscalers in spending beyond its operating cash flow. Meta Platforms reported its third quarter on October 21: operating cash flow of $32.79 billion, capital expenditure of $34.91 billion and free cash flow of negative $2.12 billion. Meta's long-term debt rose to $80.92 billion from $58.74 billion at the end of 2025, and it bought back no stock in the first nine months of 2026. Its capital spending equalled about 106% of operating cash flow in the quarter; Alphabet's equalled 121%, PPC Land's calculation.

Microsoft reported capital expenditure of $41.0 billion, including finance leases, for its fiscal fourth quarter to June 30, 2026, up 70%. Alphabet's September-quarter figure was $10.4 billion higher than Microsoft's June-quarter spending.

The debate about whether that spending will pay back has been running all year in PPC Land's coverage. In August, UBS estimates cited by Ed Zitron projected that OpenAI and Anthropic would account for 27% of Google Cloud revenue in 2026 and more than 48% in 2027, a projection rather than a reported result. In September, Cory Doctorow put sector-wide AI revenue at about $50 billion a year against roughly $1 trillion of spending. Alphabet's own figures point to returns in Cloud: revenue up 103% to $30,709 million and operating income up from $3,594 million to $11,121 million in a year. In April, Pichai said Google was supply-constrained, with demand across all its products.

Why this matters for the marketing community

In the first nine months of 2025, free cash flow of $48.7 billion covered $39.8 billion of buybacks and $7.5 billion of dividends. That arrangement has changed in 2026. Google advertising revenue was $82.0 billion in the third quarter, and Google Services earned $39.2 billion of operating income, yet capital spending of $51.4 billion was larger than that segment's entire profit. In 2026, the company is funding its spending partly with debt and new shares rather than entirely from operations.

For advertisers and publishers, the documents draw no line from that spending to advertising prices, traffic acquisition payments or the terms of Google's ad products. What they do show is a company whose costs are rising faster than its advertising revenue: depreciation up 49%, interest expense up nearly sevenfold, and AI research costs at the Alphabet level up 71%, against advertising revenue growth of 10.6%. Those cost lines are the backdrop to the changes in bidding defaults, budget handling and AI ad formats that PPC Land has tracked through 2026.

What the documents do not say

  • Updated capital expenditure guidance for 2026, or any figure for 2027.
  • How capital spending splits between Cloud, Search, YouTube and AI research.
  • What makes up the inventory build from $2.4 billion to $13.3 billion.
  • Which companies were acquired for $34.1 billion and which holdings produced the equity gains and losses.
  • Plans for buybacks, which have not resumed in 2026.

Timeline

Summary

Who: Alphabet Inc., parent of Google, and its chief executive Sundar Pichai. The cash flow affects shareholders, bondholders and the advertisers and publishers whose spending through Search, YouTube and Network still provides most of Alphabet's operating profit.

What: Third-quarter operating cash flow fell 13% to $42.3 billion while capital expenditure rose 114% to $51.4 billion, leaving free cash flow of negative $9.1 billion, the second negative quarter in a row. Trailing twelve-month free cash flow fell 73% to $19.7 billion. Alphabet issued $28.7 billion of notes and $12.4 billion of shares in the quarter, made no buybacks, and raised $142.0 billion in debt and equity over nine months. Long-term debt reached $125.1 billion and total assets $1,003.3 billion.

When: Results were published on October 28, 2026, for the quarter ended September 30, 2026. Dividends are payable on November 15 (preferred) and December 14 (common).

Where: Alphabet is based in Mountain View, California. The spending goes into data centres, servers, networking and TPU systems for Google's own services and for Google Cloud customers.

Why: Alphabet is spending more on AI infrastructure than its operations generate, and is financing the difference with borrowing and new shares instead of cash from its businesses. The July guidance implies $63-73 billion of fourth-quarter spending, which would exceed any quarterly operating cash flow Alphabet has reported, and the earnings documents do not update the outlook.