Google ad clicks gain 8% in Q3, slower than 11% over nine months

Alphabet's quarterly report on Form 10-Q, dated October 28, 2026, contains the advertising measures its earnings release left out. Paid clicks on Google Search and Google's other properties rose 8% in the third quarter from a year earlier, against 11% for the first nine months of 2026, while the average cost-per-click rose 4% in both periods. On Google Network partner sites, impressions fell 14% and cost-per-impression rose 14%, with AdMob growing and AdSense shrinking. The filing also sets out what Alphabet has promised to pay for in the years ahead: $924.4 billion of purchase commitments, $130.5 billion of data centre and energy leases that have not yet started, and $98.5 billion of backstops and guarantees for other companies' data centres and power equipment. It records a $5.2 billion payment of the European Android fine, a $1.0 billion charge for two Digital Markets Act fines that Google appealed in October, and a $16.8 billion contract with Crux AI, a joint venture in which Google holds a minority stake, inside Alphabet's $567.7 billion revenue backlog.

In Short

Alphabet, the company that owns Google, filed a long report with US regulators showing that people clicked on Google's search ads 8% more often than a year ago, a slower rise than earlier in 2026, and that advertisers paid 4% more for each click. The same report shows Google has signed contracts to buy chips, servers, electricity and video rights worth more than a trillion dollars over the coming years, and has promised to pay other companies' data centre bills if the tenants of those buildings fail to. It also lists the fines Google has paid or set money aside for, and warns that AI agents built by Google have sometimes done things in testing that nobody asked them to do. For advertisers, the click and price numbers are the clearest measure yet of how Google's search ads behaved in the quarter, and for everyone else the report shows how much of Google's future now rests on AI spending and on court cases that have not finished.

What the quarterly report adds

Alphabet published its third-quarter results on October 28, 2026, for the quarter ended September 30. That release carried the headline figures for revenue, profit, capital spending and cash flow. The Form 10-Q, the formal quarterly report every listed US company files with the Securities and Exchange Commission, is dated the same day and signed by Anat Ashkenazi, Alphabet's chief financial officer, and Marsida Saraci, its corporate controller and principal accounting officer. Its financial statements are unaudited.

The filing contains material that does not appear in the release: the monetisation metrics for Search and Network, the explanations behind each revenue line, the notes to the financial statements, an updated account of legal proceedings, a list of material changes to Alphabet's risk factors since its annual report, and the trading plans adopted by its directors and officers during the quarter. Everything below comes from the 10-Q unless it is attributed to another source or labelled as PPC Land's calculation. Figures that appeared in the earnings release are used only where they are needed to read the new material.

Clicks and prices: the numbers the release left out

When Alphabet reported on October 28, its release did not include paid clicks or cost-per-click, and said further detail would follow in the quarterly report. The 10-Q gives the year-over-year changes:

Alphabet defines its terms precisely. "Paid clicks represent engagement by users and include clicks on advertisements by end-users on Google search properties and other Google owned and operated properties including Gmail, Google Maps, and Google Play," the filing states. Cost-per-click "is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users." The clicks measure is therefore wider than Google Search alone, and the price is an average across every auction, market, device and property in the segment.

How the two numbers fit the revenue

The two changes reconcile with the revenue line they describe. Google Search & other revenue grew 12% in the quarter, to $63.35 billion. Eight per cent more clicks at a 4% higher average price would produce growth of about 12.3%, PPC Land's calculation, close to the reported figure. Over nine months, 11% more clicks at a 4% higher price would give about 15.4%, against reported growth of 15.8%, from $161,459 million to $187,020 million.

On those figures, roughly two-thirds of the third quarter's Search growth came from more clicks and one-third from higher prices. Volume, not price, is what slowed.

The slowdown can be read from the filing itself. Alphabet does not publish separate first- and second-quarter changes in the 10-Q, but the nine-month figure is a weighted average of the three quarters. If clicks rose 8% in the third quarter and 11% across all three, they must have grown by more than 11% on average across the first half of 2026. Price growth, by contrast, sat at 4% in the quarter and 4% across nine months, so the average cost of a click rose at a steady rate while the number of clicks grew more slowly.

That runs against the emphasis of Alphabet's release. Its summary of the quarter led Search with the statement that the year-over-year Search query growth rate was the highest it had been in the last five years. The filing gives no query count, so the share of searches that end in a paid click cannot be calculated. What can be said is that Google's ad clicks grew more slowly in the third quarter than in the first half, in the same quarter in which Alphabet described its fastest query growth in five years. Are the extra searches happening in places that carry fewer ads, or in formats where ads are not yet sold? The 10-Q does not answer.

What Alphabet says drives the figures

The filing's explanation of Search revenue growth is notable for what it does not mention. "The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage on mobile devices; growth in advertiser spending; and improvements we have made in ad formats and delivery," it states. The sentence contains no reference to AI Mode, AI Overviews or Gemini.

For paid clicks, Alphabet lists "changes in advertiser spending; ongoing product and policy changes; and, as it relates to paid clicks, fluctuations in search queries resulting from changes in user adoption and usage, primarily on mobile devices." For cost-per-click, the list is longer: "changes in device mix, geographic mix, advertiser spending, ongoing product and policy changes, product mix, property mix, and changes in foreign currency exchange rates." Currency is relevant this quarter. Alphabet's consolidated revenue carried a foreign exchange headwind, so part of the 4% price change is a translation effect rather than a change in what advertisers bid.

There is also a standing caveat about the metrics themselves. "As our business evolves, we periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and the number of impressions, and for identifying the revenues generated by the corresponding click and impression activity," the filing says. Year-over-year comparisons therefore depend on definitions that Alphabet controls and may change.

A 4% rise in the average price per click is close to what independent benchmarks have shown in 2026. WordStream's benchmarks put the median US cost-per-click at $5.42, up from $5.26 in its previous study, an increase of about 3%, PPC Land's calculation. Alphabet's figure is a global average across all of its owned properties and all advertisers, not a benchmark for any one account, and it reflects whatever effect the bidding defaults and budget changes PPC Land traced through 2026 have had on auctions.

Google Network: fewer ads, higher prices, AdSense down

The Network figures describe a different business moving in a different direction. Google Network revenue comes from ads that Google places on websites and apps owned by other companies through AdMob, AdSense and Google Ad Manager. Impressions on those properties fell 14% in the third quarter and 11% over nine months. Cost-per-impression rose by the same proportions.

The filing explains which parts of Network moved. "Google Network revenues increased $101 million from the three months ended September 30, 2025 to the three months ended September 30, 2026, primarily due to an increase in AdMob revenues," it states. "The overall increase was partially offset by a decrease in AdSense revenues." Over nine months the order reverses: Network revenue fell $235 million, "primarily due to a decrease in AdSense revenues, partially offset by an increase in AdMob revenues."

In other words, ads in mobile apps are growing and ads on websites using AdSense are shrinking. AdSense is the product most closely tied to publishers of written content on the open web, the sites whose traffic from Google Search has been under pressure in 2026. Ozone's benchmarking data, published in July, showed publisher ad supply down by up to 40% in the second quarter across a cohort of premium sites, with eCPMs rising as volume fell. Alphabet's figures for its own network follow a similar shape: fewer impressions at higher prices.

A figure that does not reconcile

Unlike the Search metrics, the Network measures do not fit the revenue line neatly in the third quarter. A 14% fall in impressions at a 14% higher price would produce revenue about 2% lower, PPC Land's calculation. Reported Network revenue rose 1.4%, from $7,354 million to $7,455 million. Even allowing for rounding of both percentages to whole numbers, the implied change runs from about 3% lower to about 1% lower.

Over nine months the measures do reconcile. An 11% fall in impressions at an 11% higher price implies a decline of about 1.2%, and reported Network revenue fell 1.1%. The filing does not explain the third-quarter gap. Cost-per-impression is defined as "impression-based and click-based revenues divided by our total number of impressions," a definition that may not capture every component of reported Network revenue, but Alphabet does not say which revenues fall outside it.

Traffic acquisition costs: the Network share rises

The 10-Q also splits the movement in traffic acquisition costs in a way the release does not. TAC is the money Google pays to distribution partners, such as browser makers, phone manufacturers and carriers, that send searches to Google, and to Network partners that display Google's ads.

The overall TAC rate fell from 20.1% to 20.0% in the quarter, and from 20.4% to 19.8% over nine months, "primarily due to a revenue mix shift from Google Network properties to Google Search & other properties, partially offset by an increase in the Google Network TAC rate." The rate on Search "was substantially consistent." The Network rate rose "due to a combination of factors, none of which were individually significant."

The mechanics matter for publishers. Alphabet reports Network revenue on a gross basis: "the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network partners are recorded as cost of revenues." A higher Network TAC rate means Google passed a larger share of each Network dollar to the sites and apps that showed the ads. The filing does not give the Network rate itself, so the size of the change cannot be measured, and a larger share of a smaller AdSense business does not necessarily mean more money for any individual publisher.

The increase in total TAC, the filing says, was "largely due to an increase in TAC paid to distribution partners, primarily driven by growth in revenues subject to TAC." Those distribution payments are the same arrangements the US search case targets, a point covered in the legal section below.

YouTube: brand advertising leads

For YouTube, the release gave revenue but no reason for the slowdown to 9% growth. The filing gives a partial one. "The growth was driven by our brand advertising products followed by our direct response advertising products, both of which benefited from increased spending by our advertisers," it states of the $946 million increase in the quarter and the $3.2 billion increase over nine months.

The order is the useful part. Brand campaigns, which pay for ads that are seen, grew more than direct response campaigns, which are bought to drive an action such as an install or a purchase. Alphabet recognises the two differently: "We recognize revenues for performance advertising when a user engages with the advertisement. For brand advertising, we recognize revenues when the ad is displayed, or a user views the ad." The filing does not quantify either category, and it does not explain why growth slowed from the first half.

YouTube also drives costs. The rise in other cost of revenues came "primarily" from TPU inventory, depreciation, "content acquisition costs, largely for YouTube," and other infrastructure costs. Content acquisition costs are payments to the owners of licensed video, calculated "based on revenues generated, subscriber counts, or a flat fee." The filing lists content licensing agreements among Alphabet's long-term commitments, with "remaining terms extending through 2031."

On the subscription side, the $1.4 billion increase in Google subscriptions, platforms and devices revenue in the quarter came from subscriptions and devices. "The increase in subscriptions revenues was primarily due to the contribution from growth in paid subscriptions across both YouTube services and Google One," the filing states, while "the increase in devices revenues was primarily driven by increased sales of Pixel devices." Over nine months the line grew $5.1 billion, mostly from subscriptions. The 10-Q now describes Google One as a product "which offers access to our most capable Gemini models," which places part of Alphabet's consumer AI revenue inside the same reporting line as YouTube Premium and NFL Sunday Ticket rather than in Cloud.

A $567.7 billion backlog, and a partner inside it

Alphabet's revenue backlog, which accounting rules call remaining performance obligations, stood at $567.7 billion on September 30, 2026. Of that, $560.8 billion related to Google Cloud. Backlog is revenue that customers have contracted for and that Alphabet has not yet recognised; it "excludes cancelable contracts," according to the filing.

Three months earlier, the figure was lower. Alphabet's second-quarter 10-Q put total backlog at $519.5 billion on June 30, 2026, of which $513.9 billion related to Cloud. The total therefore rose $48.2 billion in the third quarter and the Cloud portion $46.9 billion, PPC Land's calculation. In April, PPC Land reported that backlog had nearly doubled sequentially to $462 billion in the first quarter, a quarter in which Alphabet also widened the definition, as described below. Since then, the Cloud portion has grown by about $52 billion in the second quarter and $47 billion in the third, PPC Land's calculation.

Timing is set out more precisely than in the release. "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," the filing states. That is about $312 billion within two years, PPC Land's calculation, against nine-month Cloud revenue of $75.5 billion in 2026.

There is also a definitional change that affects comparisons with earlier years. "In the first quarter of 2026, we elected to change our reporting of revenue backlog to also include contracts with an original expected term of one year or less," Alphabet says. Backlog figures from 2025 and earlier were calculated on a narrower basis.

Crux AI: $16.8 billion from a related party

The most unusual line in the backlog note is a single contract. "Our revenue backlog as of September 30, 2026 included $16.8 billion associated with a multi-year commercial agreement with Crux AI, an unconsolidated equity method joint venture and a related party," the filing states.

Crux AI did not exist under that name at the start of the year. In May 2026, according to the filing, Alphabet "entered into an agreement with Blackstone Inc. ('Blackstone') to form a US-based joint venture entity to provide data center capacity, operations, networking, hardware, and software as a single compute-as-a-service offering." Under the agreement, "Blackstone is committed to provide future capital contributions of up to $5.0 billion, and we are committed to provide future data center and energy infrastructure backstops in support of agreements the venture may enter into of up to $10.0 billion, subject to certain conditions."

"In the third quarter of 2026, the venture was formally announced as Crux AI, and we entered into a multi-year commercial agreement with the venture which constitutes a related party transaction," the filing continues. Google holds a minority interest. The venture is "a variable interest entity for which we are not the primary beneficiary," so Alphabet does not consolidate it, and it accounts for its stake under the equity method. On September 30, the carrying value of that stake "was not material."

The arithmetic gives Crux AI weight in the quarter. The $16.8 billion contract equals about 35% of the $48.2 billion by which total backlog rose in the third quarter, PPC Land's calculation, since the agreement was signed during the quarter. Put differently, more than a third of the quarter's new contracted revenue came from a company that Google co-founded, in which it holds a stake, and to which it has promised up to $10.0 billion of backstops.

Outside reporting adds detail the 10-Q does not. According to Bloomberg, which reported the financing on September 16, Crux AI lined up about $22 billion of bank debt from a group of ten lenders to buy Google's TPUs, secured by the chip inventory and existing customer agreements, with Blackstone providing an initial $5 billion of equity. Alphabet's filing does not name the lenders, give the venture's debt, or describe what Crux AI buys under its commercial agreement. It does not say whether Crux AI's purchases are counted in Cloud's TPU product revenue.

The filing discloses the arrangement as a related party transaction, as accounting rules require. The structure means that a portion of Cloud's contracted growth depends on a venture whose obligations Google has partly agreed to support. Alphabet's new risk factor language describes the general exposure: "We also have a number of large, long-duration commercial agreements, which could increase our liabilities and obligations."

TPUs: hardware sold with a buy-back clause

The release described TPU systems as a meaningful contributor to Cloud growth without a figure. The filing still gives no figure, but it explains how the sales work and how Alphabet accounts for them.

"Our Google Cloud product sales generally consist of the sale of TPU systems comprising hardware, software, installation, support, and extended warranty services," the revenue recognition note states. Then comes a clause about repurchases: "Customer arrangements may also include options requiring us to repurchase the hardware and embedded software at pre-set prices, over a multi-year term, which are generally accounted for as rights of return. Where the customer assigns the TPU systems to another party, but retains the ability to require us to repurchase the TPU systems, we account for this as a financial guarantee."

Some buyers of Google's AI chips can therefore require Google to take the hardware back at agreed prices for years after the sale. Note 10 gives the exposure: "As of September 30, 2026, our maximum potential future payments under these guarantees were $6.6 billion, and the fair value of these obligations was not material." Alphabet's view is that the clause is unlikely to be used. "Based on the extent of the discount on repurchase and other factors, we do not believe counterparties have an economic incentive to exercise their option to require us to repurchase," the filing says.

The risk factors put the same arrangement in harsher terms, listing among Alphabet's obligations "contingent repurchase obligations for certain hardware and embedded software at prices below original cost." The phrase indicates that the pre-set prices sit below original cost, which is why Alphabet believes customers would rarely exercise them. It also means that if AI hardware loses value faster than expected, the clause is the point at which risk returns to Google.

Who buys, and when the revenue lands

The filing describes the customer base for on-premises TPU systems as small. "We have signed a limited number of agreements to supply TPU systems to customers who require or provide on-premises infrastructure for specialized, high-scale workloads. In the second quarter of 2026, we began recognizing revenues from these agreements, with the significant majority to be recognized in 2027."

That sentence explains a balance sheet line the release left open. Inventory rose from $2,439 million at the end of 2025 to $13,308 million on September 30, and the filing states that "Inventory consists primarily of hardware related to TPU systems for sale to enterprise customers and consumer devices, which primarily include the Pixel family of products." Alphabet uses "third-party contract manufacturers" and holds raw components, work in progress and finished goods. With most of the TPU revenue due in 2027, much of that inventory appears to be hardware built ahead of deliveries, though the filing does not split inventory by product.

The costs are visible in the Cloud segment. Cloud's "other costs and expenses," a category that includes inventory and infrastructure usage, rose 109% in the quarter, from $5,977 million to $12,507 million, PPC Land's calculation from the segment note. Employee compensation in Cloud rose 27%, from $5,586 million to $7,081 million. Alphabet attributes the rise in Cloud operating income to revenue, "partially offset by increases in inventory and related costs associated with the sale of TPU systems and usage costs for technical infrastructure."

One TPU buyer is visible from outside. Anthropic's IPO exhibits, which PPC Land reviewed in October, describe a lease arrangement in which Google sells TPU pods to Broadcom, which then leases them to an Anthropic infrastructure subsidiary. That is the kind of assignment to "another party" that the 10-Q says Alphabet treats as a financial guarantee when the original buyer keeps the right to require a repurchase. The filing does not name any TPU customer, so whether that arrangement is among those covered by the $6.6 billion cannot be confirmed from it.

More than $1 trillion of promises

The most consequential numbers in the filing are not on the balance sheet. They are commitments Alphabet has signed but not yet paid for, and contingent obligations it may never have to pay.

Note 10 opens with the scale. "As of September 30, 2026, total commitments under these obligations were $802.1 billion, which includes $4.5 billion of standby letters of credit issued and outstanding to secure performance obligations under our long-term supply agreements." These "consist mostly of long-term supply agreements to secure future production capacity for technical infrastructure and inventory components," with contracts extending "through 2032" and "the significant majority of the commitment payments through 2031."

The management discussion widens the frame. Alphabet lists "$924.4 billion material purchase commitments, of which $802.1 billion relates to multi-year commitments for technical infrastructure and inventory, energy take-or-pay contracts, and content licenses." The remainder "primarily consists of open purchase orders." Of the $924.4 billion, "$213.4 billion is due within 12 months."

Two qualifications in the filing shape how those numbers should be read. First, some supply agreements "contain fixed volume commitments with variable pricing between minimum and maximum rates and/or the ability to partially reduce committed volumes," and "the amounts disclosed above reflect pricing and volumes at the maximum contractual limits of the current contracts." The $802.1 billion is a ceiling, not an estimate of what will be paid. Second, "power purchase and energy agreements without a fixed or minimum commitment are not included," so some energy spending sits outside the total altogether.

The full list

Set out in one place, the commitments and contingent obligations in the filing are:

The first three lines add up to $1,076.8 billion, and with the contingent items the total reaches $1,175.3 billion, PPC Land's calculation. The firm commitments alone equal about three times Alphabet's revenue for the first nine months of 2026, which was $357.3 billion, and about four times its cash, cash equivalents and marketable securities of $265.1 billion.

How do those numbers compare with Alphabet's peers? Meta Platforms' third-quarter 10-Q, which PPC Land examined on October 24, showed $454.52 billion of non-cancelable contractual commitments and $355.73 billion of leases not yet commenced. Meta's two figures total $810.25 billion; Alphabet's equivalent two total $1,054.9 billion, PPC Land's calculation. The mix differs. Meta leans more on leases, in which a developer builds and owns the data centre. Alphabet leans more on direct purchases of equipment and capacity, and on backstops for buildings that others own.

Energy contracts that run to 2054

The energy portion of the commitments has the longest horizon in the filing. "The energy service agreements include terms ranging from three to 26 years, with obligations through 2054, and generally include take-or-pay provisions for minimum quantities of energy supply and substantive termination fees," Note 10 states. A take-or-pay contract obliges the buyer to pay for a minimum volume whether it uses it or not.

Alphabet also guarantees equipment purchases for its power suppliers. "To support counterparty procurement of long-lead time equipment for our future power purchase and energy agreements, we provide financial guarantees to certain counterparties with varying terms through January 2049. As of September 30, 2026, our maximum potential future payments under these guarantees were $16.2 billion, upon which we may receive certain assets." Together with the $6.6 billion of TPU repurchase guarantees, that makes up the $22.8 billion of financial guarantees.

Backstops: paying the rent if someone else cannot

The $75.7 billion of backstops are the least familiar item to most readers. The filing describes them as "financial support in the form of backstop obligations relating to data centers, including data center lease payments and the associated energy costs for certain agreements."

In practice, a third-party developer builds a data centre for a tenant, and Google promises to cover the lease payments and energy costs if the tenant defaults. "Of these obligations, $48.0 billion is executed with third-party data center providers, which are accounted for as credit derivatives. $27.7 billion represents our obligation to put in place future backstops to support data center and energy supply infrastructure, of which $10.0 billion is with Crux AI, a related party."

The executed portion has grown quickly. The notional value of Alphabet's credit derivatives was $16,940 million at the end of 2025 and $48,012 million on September 30, 2026, an increase of 183%, PPC Land's calculation. The notional amounts "represent the maximum potential exposure regarding future payments in the event of specified default scenarios by underlying parties."

The terms are long. "These agreements carry remaining terms of up to 15 years and the total potential exposure reduces over time as the underlying parties fulfill their payment obligations," the filing states. If a default happens, Google is not left only with a bill. "Upon a default under these credit backstops, we retain the right to assume the underlying leases for internal use or to sublease to third parties." It can also exit: "Under specific conditions or following a predetermined period, we may elect to extinguish the backstop obligation by making a termination payment," which may be "partially offset by equity or cash receipts from counterparties."

Why would Google guarantee another company's data centre? The filing does not say who the tenants are or what the buildings will run. What the structure does is let a developer borrow against a Google promise rather than against the tenant's credit alone. The fair value of these credit derivatives on the balance sheet is small: a liability of $606 million. Their recorded gains were $277 million in the quarter and $200 million over nine months, within other income.

The risk factor describes what could go wrong. "In the event of nonperformance by us, our counterparties, or vendors, the exercise of repurchase rights, or industry challenges, we may incur additional liabilities, have excess capacity or inventory that we cannot easily redeploy, and not receive payments from our counterparties or customers. Depending upon market conditions, these additional costs or exposures could be significant."

Variable interest entities

Many of these arrangements involve entities Alphabet does not control but in which it has an economic stake, which accounting rules call variable interest entities. Note 5 lists them: "certain of our investments in private companies and renewable energy entities, certain leases and credit derivatives with data center entities, and financial guarantees with energy infrastructure entities." Because Alphabet has "determined that we do not direct the activities that most significantly impact the economic performance of these entities," it does not consolidate them.

Its exposure to them has jumped. "As of December 31, 2025 and September 30, 2026, future funding and financial support commitments were $1.1 billion and $31.9 billion, respectively." That $31.9 billion includes $20.0 billion of milestone-based funding for a private company, discussed below, and the $10.0 billion of potential backstops for Crux AI.

$145 billion of equipment not yet switched on

The balance sheet shows how much of Alphabet's spending has not yet started to work. Property and equipment includes "assets not yet in service," which the filing defines as assets "that are not ready for their intended use, including assets in the process of construction or assembly, and consist primarily of technical infrastructure."

That category reached $145,270 million on September 30, up from $78,592 million at the end of 2025, an increase of 85%, PPC Land's calculation. It accounts for 39% of net property and equipment of $372,827 million. Technical infrastructure in service rose to $282,842 million, about 60% of which "were comprised of servers and network equipment," the same proportion as at the end of 2025.

The distinction matters for future costs. "Depreciation of our property and equipment commences when such assets are ready for their intended use," the filing states. Almost $145 billion of assets therefore carry no depreciation charge yet, and will begin to as they enter service. "The time frame from date of purchase to placement in service of these assets may extend from months to years," Alphabet notes, because data centre projects "are generally multi-year projects with multiple phases."

Part of the spending has been recorded but not yet paid. Property and equipment included in accrued liabilities and accounts payable, a non-cash item, was $35,921 million for the first nine months of 2026, against $14,574 million a year earlier. Accrued purchases of property and equipment on the balance sheet rose from $8,877 million to $21,398 million. And Alphabet capitalised $405 million of interest in the quarter and $1.0 billion over nine months, adding borrowing costs to the value of assets under construction rather than expensing them.

The risk factors carry a warning about how long those assets will last on the books. "Changes in facts and circumstances such as changes to historical asset performance, expected technology advancements, and future network deployment plans could change the period over which we expect to benefit from the asset and impact our financial condition and operating results," the filing states. A shorter useful life for servers would raise annual depreciation.

Most of the assets sit in one country. Long-lived assets in the United States were $302,224 million on September 30, against $90,876 million internationally, so 77% of Alphabet's property, equipment and lease assets are in the US, PPC Land's calculation.

Leases signed, leases waiting

The lease note shows a similar pattern of obligations waiting to start. Total undiscounted future payments on leases already commenced were $24.4 billion for operating leases and $4.3 billion for finance leases. Leases signed but not yet commenced, "primarily related to data centers and energy infrastructure," carry $130.5 billion of future payments, about four and a half times the leases already running, PPC Land's calculation. They "will commence between 2026 and 2031 with non-cancelable lease terms between one and 26 years."

One short-term arrangement stands out. The lease cost table includes "a short-term lease agreement entered into in June 2026, and amended in September 2026, with a remaining non-cancelable commitment of approximately $6.0 billion as of September 30, 2026." Because its term is 12 months or less, it creates no asset or liability on the balance sheet. Short-term lease cost rose from $11 million in the third quarter of 2025 to $109 million. Alphabet does not identify the counterparty or the asset.

Finance lease costs rose from $169 million to $447 million in the quarter, and Alphabet made "$159 million and $994 million of lease prepayments for leases not yet commenced" in the quarter and nine months. The weighted-average discount rate on both operating and finance leases rose to 4.0%, from 3.6% and 3.1% respectively at the end of 2025.

SpaceX, one private company and a $20 billion option

The investment portfolio has become one of the largest drivers of Alphabet's reported profit, and the filing says more about it than the release.

SpaceX

Marketable equity securities, shares in listed companies, stood at $6,313 million at the end of 2025 and $90,384 million on September 30, 2026. A footnote identifies most of the increase: the total "includes $75.2 billion of Space Exploration Technologies Corp. ('SpaceX') shares subject to short-term restrictions on the ability to sell." SpaceX became a listed company during 2026; the management discussion refers to gains from "SpaceX prior to its initial public offering."

The third quarter brought losses on that holding. Other income fell $21.0 billion from a year earlier, "primarily related to net unrealized losses in our marketable equity securities largely from SpaceX, and decreased net unrealized gains on our nonmarketable equity securities largely from a private company." The unrealised net loss on marketable and other equity securities was $12,436 million in the quarter.

The second-quarter filing had valued Alphabet's SpaceX shares at $94.1 billion, of which about $80 billion was under short-term sale restrictions, according to The Next Web's report on July 23. The third-quarter footnote refers only to the $75.2 billion under short-term restrictions and does not give a total for the holding, so the change between the two quarters cannot be measured precisely from the filings. What is clear is that a stake in a rocket and satellite company now moves Alphabet's quarterly earnings by billions of dollars in either direction, and that the shares cannot yet be sold freely.

The private company

Non-marketable securities, investments in private companies, doubled from $68,687 million to $135,230 million in nine months. The filing is specific about concentration: "As of September 30, 2026, our investments in non-marketable securities accounted for under the measurement alternative primarily consist of our investment in one private company."

The carrying value of those holdings was $128,169 million. Their total initial cost was $48,595 million, up $20.2 billion from the end of 2025, and cumulative upward adjustments were $88,784 million, up from $44,485 million. Those upward adjustments are recorded when there is an "observable transaction" in the same or similar securities, such as a new funding round. In the first nine months of 2026, Alphabet recorded $116,316 million of net unrealised gains on these securities, but only $3,027 million in the third quarter.

Alphabet does not name the company. Valuation for most of these holdings relies on Level 3 inputs, those not based on observable market prices: of the $128.2 billion, "$8.8 billion was remeasured at fair value during the three months ended September 30, 2026 and was primarily classified within Level 3 of the fair value hierarchy at the time of measurement." The methods include "option pricing models, market comparable approach, and common stock equivalent method," with inputs such as "volatility, expected time to exit, risk-free rate, and the rights and obligations of the securities we hold."

A $20 billion funding commitment priced as a derivative

A new type of instrument appears in the derivatives note. "A certain strategic investment includes forward funding commitments that are accounted for as equity derivatives, as they include rights to participate in future capital funding, the exercise of which is contingent upon the achievement of specified operational and financial milestones." Note 5 gives the size: "$20.0 billion of future capital funding commitments with a private company contingent upon the achievement of specified operational and financial milestones through 2030."

The notional amount of equity derivatives went from zero at the end of 2025 to $21,091 million. They "primarily represent an agreement for future capital funding in the form of notes receivable or equity to be funded in multiple tranches contingent upon the achievement of specified operational and financial milestones through 2030." On the balance sheet they appear as assets of $579 million and liabilities of $445 million. Over nine months they produced a loss of $296 million; in the third quarter, a gain of $83 million.

The 10-Q does not name the counterparty. The structure resembles the note purchase agreement between Google and Anthropic that PPC Land examined in Anthropic's IPO exhibits: a $30 billion facility with two draw periods running to December 31, 2030, one tied to delivered compute capacity and one to Anthropic reaching a revenue target, with a cap on Google's stake of 14.99%. That comparison is PPC Land's; Alphabet's filing does not identify Anthropic as the private company, the counterparty to the equity derivative, or the source of its unrealised gains. When Anthropic filed for its IPO, PPC Land reported at least $114.5 billion of compute commitments to Google Cloud running to July 2033, and cited a ZeroHedge estimate that put Google's share of Anthropic's undrawn convertible capacity at $20 billion, the same amount as the 10-Q's milestone commitment. If those contracts sit within Alphabet's backlog, the same company would be a Cloud customer, an investee and a potential recipient of further Google funding, though the filing names none of these roles.

What the gains do to tax

The investment gains have a tax consequence that the balance sheet makes visible. Deferred income tax liabilities rose from $919 million at the end of 2025 to $27,833 million on September 30, while deferred tax assets fell from $9,113 million to $1,458 million. Alphabet records tax on unrealised gains at the statutory rate even though no tax is yet payable. In the cash flow statement, deferred taxes added $33,077 million to operating cash flow over nine months.

The effective tax rate fell to 18.2% in the quarter from 20.5% a year earlier. The filing attributes the decline "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." Over nine months the rate rose to 19.0% from 18.4%, driven by "higher pre-tax earnings from unrealized gains on equity securities" and "an increase in acquisition-related tax integration costs."

The filing also notes a change in international tax rules. "In January 2026, the OECD introduced new guidance including a 'Side-by-Side Safe Harbor' which, if elected, exempts US domestic operations from being taxed by global minimum tax rules. However, it does not exempt foreign subsidiaries from local minimum tax requirements." Alphabet says these rules "did not have a material effect" on its nine-month tax provision. Gross unrecognised tax benefits, positions that tax authorities could challenge, rose to $12.5 billion from $11.5 billion.

The bond portfolio, by contrast, shows losses. Available-for-sale debt securities carried gross unrealised losses of $2,576 million on September 30, mostly in government bonds, against $186 million at the end of 2025. They are recorded in other comprehensive income, not in profit.

The debt, line by line

Alphabet's borrowing in 2026 has been described in aggregate in the release. The filing's debt table shows how it was done.

"During 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," Note 6 states, across sterling, Swiss franc, euro, Canadian dollar, Japanese yen and Australian dollar markets. The table on September 30, 2026 shows:

One maturity date stands out. The sterling notes run to 2126. The cover page of the filing lists "6.125% Senior Notes due 2126" among the securities registered on Nasdaq, a 100-year bond. Alphabet will be paying interest on that note for a century unless it redeems it early, which the filing says it may do for fixed-rate notes other than the yen issues "at any time in whole or in part at specified redemption prices."

The third-quarter issues

The third-quarter issues carried higher coupons than most of Alphabet's earlier debt. "In the third quarter of 2026, we issued senior unsecured notes consisting of: $23.8 billion US dollar-denominated fixed-rate notes and $1.3 billion US dollar-denominated floating-rate notes with a weighted-average coupon rate of 5.55% and a weighted-average maturity of 15 years; and A$3.3 billion Australian dollar-denominated fixed-rate notes and A$2.3 billion Australian dollar-denominated floating-rate notes with a weighted-average coupon rate of 5.82% and a weighted-average maturity of eight years."

The exhibit list identifies the US issue, documented in a filing dated August 10, 2026: floating-rate notes due 2028 and 2029, and fixed-rate notes at 4.500% due 2028, 4.625% due 2029, 4.875% due 2031, 5.200% due 2033, 5.450% due 2036, 6.250% due 2046, 6.375% due 2056 and 6.500% due 2066. For comparison, Alphabet's 2020 dollar notes, still outstanding at $9.0 billion, carry coupons of 0.80% to 2.25%.

Below face value

The notes are valued below their face amount. "The total estimated fair value of the outstanding notes was approximately $114.9 billion" on September 30, against a face value for the notes of about $126.3 billion, PPC Land's calculation from the debt table, which also includes $1.2 billion of other long-term debt. That is a gap of about $11.4 billion, or 9%. The filing does not explain it. Bond prices fall when market interest rates, or the extra yield investors demand from a borrower, rise after the bonds are sold.

Alphabet has begun hedging some of the new fixed-rate debt. It entered into $7.0 billion of interest rate swaps designated as fair value hedges, "effectively converting a portion of our fixed-rate debt to floating-rate debt." It also uses $31.8 billion of foreign currency debt to hedge its investments in foreign subsidiaries, up from $15.4 billion at the end of 2025.

Interest

Interest expense in the quarter was $967 million, net of $405 million of capitalised interest, so gross interest was about $1.37 billion, PPC Land's calculation. Interest income was $1,768 million. The company still earns more on its cash than it pays on its debt, but the gap has narrowed from $933 million a year earlier to $801 million. Floating-rate notes pay the "Secured Overnight Financing Rate (SOFR) plus 0.44% to 0.60%" in US dollars, and the Australian bank bill swap rate plus 0.65% to 0.90%.

The short-term facilities were unused. Alphabet had "no commercial paper outstanding" under a $25.0 billion programme and $10.0 billion of revolving credit facilities, "of which $4.0 billion expires in April 2027 and $6.0 billion expires in April 2030," with nothing drawn.

A new risk factor addresses the borrowing directly. "Disruptions in our ability to access the capital markets, obtain future financing, or manage our indebtedness could adversely affect our ability to execute our strategy and harm our financial condition," it is headed. "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."

Waymo borrows on its own account

One borrowing in the filing does not carry Alphabet's credit. "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."

The price shows how lenders see the difference between the parent and the subsidiary. Alphabet's own floating-rate dollar notes pay SOFR plus 0.44% to 0.60% and are unsecured. Waymo's loan pays SOFR plus 5.25% and is secured on its assets, a spread about 4.7 to 4.8 percentage points wider, PPC Land's calculation. According to The Next Web, which reported the loan on October 8, it was Waymo's first debt financing, led by Pimco, Blackstone and Sixth Street, and followed a $16 billion equity raise in February at a $126 billion valuation.

The filing shows the effect of outside money on Alphabet's accounts. Noncontrolling interests, the portion of consolidated subsidiaries owned by others, rose from $3.4 billion at the end of 2025 to $6.9 billion. Alphabet received $3,758 million in 2026 from the "sale of interest in consolidated entities," without naming the entity.

Other Bets: loss up 52% over nine months

Waymo sits in Other Bets, which the 10-Q describes as generating revenue "primarily from the sale of autonomous transportation services and internet services." Its revenue was $1,165 million for the first nine months of 2026, against $1,167 million a year earlier. Its operating loss over the same period rose from $3,898 million to $5,946 million, an increase of 52%, PPC Land's calculation, "primarily driven by increases in employee compensation expenses and third-party services fees."

The risk factor on new businesses now names the areas. "Within Other Bets, we are investing significantly in areas such as transportation and life sciences, among others. These investment areas face intense competition from large, experienced, and well-funded competitors."

GFiber leaves the group

The "internet services" half of Other Bets is on its way out. "In March 2026, we entered into a definitive agreement to contribute our ownership interest in GFiber, a wholly owned subsidiary, into a newly formed entity. Upon closing, we expect to receive $1.5 billion in cash, a $2.0 billion note receivable, and a 49.99% equity interest," the filing states. Alphabet expects the transaction "to close in late 2026."

GFiber is classified as held for sale, and Alphabet has stopped depreciating it. "Held for sale assets primarily consist of property and equipment of $7.1 billion, which is included in other current assets." No impairment was recorded. According to Fierce Network, which reported the deal on March 12, the new entity combines GFiber with Astound Broadband, controlled by the investment firm Stonepeak. After closing, Alphabet will hold just under half of the combined company, account for it under the equity method, and no longer consolidate it, so Other Bets revenue will lose GFiber's contribution.

Wiz and Intersect: what Alphabet paid for

The filing gives the final accounting for the two largest acquisitions of 2026.

Wiz

"On March 11, 2026, we completed our acquisition of Wiz for $29.5 billion, after purchase price adjustments and excluding post combination compensation arrangements," Note 8 states. When PPC Land covered the deal's European review in January, the price was reported at about $32 billion. The difference of roughly $2.5 billion, PPC Land's calculation, lies in purchase price adjustments and the compensation arrangements for Wiz staff that accounting rules treat as future pay rather than as part of the price.

The preliminary allocation shows what Google bought:

Goodwill, the premium over identifiable assets, accounts for 77% of the price, PPC Land's calculation. Alphabet attributes it to "synergies expected to arise after the acquisition" and notes that it "is not deductible for tax purposes." The Cloud segment's goodwill rose from $7,660 million to $31,570 million in nine months.

The intangible assets add a recurring cost. Amortisation expense on all of Alphabet's acquired intangible assets rose to $375 million in the third quarter from $129 million a year earlier, and Alphabet expects $1,310 million in 2027, $1,148 million in 2028 and $3,562 million after 2030. The filing describes Wiz as "an investment by Google Cloud to accelerate our capabilities in multicloud and AI-driven security."

Intersect

"On March 10, 2026, we completed our acquisition of Intersect, a developer of renewable energy, for $5.9 billion, after purchase price adjustments," the filing states. When the deal was announced in December 2025, PPC Land reported a price of $4.75 billion in cash plus assumed debt. The filing's figure is about $1.1 billion higher than that announced cash price, a difference it attributes only to "purchase price adjustments." Alphabet separately took on $1,214 million of Intersect's debt.

The allocation is mostly physical: $5,129 million of property and equipment and $2,174 million of goodwill, against $410 million of acquired cash. The $1.2 billion of debt appears in the debt table as "other long-term debt." Intersect is itself a variable interest entity in which Alphabet is the primary beneficiary, and its results are "allocated to our segments," split between Google Services and Google Cloud. The filing's purpose statement is short: the acquisition "enables acceleration of data center capacity and energy development."

The legal ledger: payments, charges and appeals

Alphabet's courtroom losses of the past two years have been covered as they happened. The 10-Q is where they turn into accounting entries, and in several cases it adds a step that had not been public: a payment made, a charge booked, an appeal filed.

The summary figure is on the balance sheet. Accrued fines and settlements, a current liability, stood at $13,807 million on September 30, against $15,594 million at the end of 2025. The balance fell by only $1.8 billion even though the Android payment alone, described below, was $5.2 billion, because new liabilities were added during the year, PPC Land's calculation. The filing records about $2.1 billion for a Swedish damages award in the second quarter and $1.0 billion for two EU fines in the third.

The rule Alphabet applies is set out at the start of the legal note. "We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated." For many of the cases, no liability is recorded because Alphabet says it cannot make that estimate. And where the money is booked matters for anyone reading segment results: fines and settlements are largely recorded in general and administrative expenses, and "certain fines and settlements" are among the corporate costs not allocated to Google Services, Google Cloud or Other Bets.

The year-over-year comparison in the third quarter is flattered by this. General and administrative expenses fell $1.3 billion, "primarily driven by a decrease in expenses related to legal and other matters of $2.1 billion, largely reflecting the effect of a $3.5 billion EC fine accrued in the third quarter of 2025." Google Services' operating income growth was also helped by "a decrease in expenses related to legal and other matters."

Android: paid in July

The longest-running European case is closed. "We subsequently appealed the General Court's affirmation of the EC decision, which was denied by the European Court of Justice in July 2026. The EC decision is now final. In July 2026, we made a cash payment of $5.2 billion for the fine plus accrued interest," the filing states.

PPC Land reported the ruling on the day it was handed down, when the Court of Justice dismissed Google's appeal in full and confirmed the 4.125 billion euro fine on July 2. The 10-Q adds the payment and its size. One inconsistency appears within the filing itself: the executive overview states that "On July 2, 2026, the EC upheld its 2018 decision," while the legal note correctly attributes the July ruling to the European Court of Justice.

Digital Markets Act: appealed in October

In July, the European Commission fined Google 460 million euros over self-preferencing in Search and 430 million euros over Google Play's restrictions on steering, the first non-compliance fines under the Digital Markets Act. At the time, Google said it was weighing an appeal. The 10-Q settles the question: "We appealed both decisions in October 2026; both appeals remain pending. We recognized a charge totaling $1.0 billion in the third quarter of 2026 for the fines."

An appeal does not suspend compliance. After the 60-day deadline of September 21, Google removed live prices, trip-date search and free product listings from results in the European Economic Area and attributed the changes to the regulation. The filing's risk factors describe the Act's reach more broadly than before, saying it requires in-scope companies "to obtain user consent for combining data across certain products, mandate the sharing of search data with third-party search engines, and require interoperable access to the Android operating system by third-party AI companies." The search data obligation follows a separate Commission decision in July that requires Google to share anonymised query, click and ranking data with rivals from January 2027. The phrase about interoperability for "third-party AI companies" on Android is the clearest statement in an Alphabet filing that EU rules could open its mobile operating system to competing AI assistants.

PriceRunner: $2.1 billion booked

The Swedish judgment against Google in a case brought by PriceRunner, now part of Klarna, was decided on July 1. PPC Land reported that the Stockholm Patent and Market Court awarded 950 million pounds, 675 million Danish kroner and 1.142 billion Swedish kronor in principal damages over Google's treatment of comparison shopping services. The filing converts and books it: "The Court awarded the plaintiff approximately $2.1 billion (awarded in multiple currencies) in principal damages plus accrued interest and costs, which we recognized in the second quarter of 2026. We appealed the decision, which remains pending."

The filing uses PriceRunner as its example of a growing category: "private claims stemming from regulatory proceedings in which Google's liability has been fully determined and the remaining dispute concerns potential damages." In the shopping case, the Commission's 2017 decision and the courts' later confirmation established the abuse; the Swedish court only had to decide what it cost a rival.

US advertising technology: an appeal on two fronts

On September 2, Judge Leonie Brinkema rejected the Justice Department's request to force a sale of AdX and accepted behavioural remedies instead. The 10-Q summarises them as "certain behavioral remedies concerning interoperability, data access, and auction conduct." On October 2, the parties filed a joint proposed final judgment in which the government sought six months for key changes and Google sought twelve.

What the filing adds is Google's plan. "After the Court enters its final judgment, we plan to appeal the adverse portion of the April 2025 decision and, upon full review of the remedies decision, we may also appeal aspects of the September 2026 decision." Google has said since 2025 that it would appeal the liability finding. The statement that it may also appeal the remedies, which it had argued for in place of a divestiture, is new. As of the filing date, the court had not entered final judgment.

A second US trial is waiting. The case brought by state attorneys general in the Eastern District of Texas, filed in December 2020, "will take place after the conclusion of the remedies proceedings in the DOJ case." For both, "given the nature of these matters, we cannot estimate a possible loss."

European ad tech: a guarantee instead of cash

The Commission's 2.95 billion euro fine for self-preferencing in advertising technology, imposed in September 2025, has not been paid in cash. "We appealed the ruling in November 2025, which remains pending. We recognized a charge of $3.5 billion in the third quarter of 2025, and we placed bank guarantees in the fourth quarter of 2025 in lieu of cash payment." The filing rounds the fine to 3.0 billion euros. A UK Statement of Objections on the same business, issued in September 2024, "remains pending."

The older AdSense for Search case is also unresolved. The General Court annulled the 1.5 billion euro fine in September 2024, and the Commission's appeal to the Court of Justice "remains pending." Alphabet recognised a $1.7 billion charge for that fine in 2019.

US search: both sides appeal

The search case, in which a final judgment was entered in December 2025, is now on appeal from both directions. Google filed its notice of appeal in January and in May asked the appeals court to reverse the entire liability finding. The 10-Q records two further steps. Google's motion to pause the remedies was denied "as premature, allowing Google to seek a stay until the scope of certain remedies is more defined." And "in February 2026, the DOJ and state Attorneys General also appealed," which means the government is seeking a different outcome too.

The judgment, as the filing describes it, "imposes restrictions on how Google distributes its services and requires Google to share certain search data with and offer syndication services to certain competitors." The risk factor on litigation lists what remedies of that kind could mean: "prohibitions or restrictions on default distribution arrangements and revenue-sharing agreements, requirements to share or license search data and provide syndication services to rivals, changes to app store billing and distribution practices, or structural relief such as the required divestiture of certain advertising technology assets or other business units." The first item on that list is the same category of payments that, according to the TAC discussion, drove most of the quarter's increase in traffic acquisition costs.

Google Play: one case settled, one reverted

Two Play cases moved during the year. The settlement with 50 state attorneys general and three territories, first announced in December 2023 with a $630 million consumer fund, was approved by the court in August 2026. Google had funded it into escrow in May 2024.

The Epic Games case went the other way. In November 2025, PPC Land reported a joint proposal by Google and Epic to modify the injunction, with service fees capped at 9% or 20% on alternative payments. The 10-Q gives a different chronology: a settlement with Epic in March 2026, the withdrawal of Google's Supreme Court petition that month, a joint motion to modify the injunction in April, and then a reversal. "In July 2026, Epic and Google jointly withdrew the motion to modify the injunction, and Google is complying with the October 2024 remedies decision." The October 2024 order, which Google had fought for nearly two years, is therefore the one in force.

Private claims multiply

Beyond the government cases, the filing describes "private individual and collective actions that overlap with claims pursued by regulatory authorities" in the US and "across Europe," and for most of them it says it "cannot estimate a possible loss." PPC Land has tracked several: a UK collective redress claim on behalf of advertisers worth about 5 billion pounds, certified as an opt-out case in August; Gannett and Daily Mail claims totalling about $1.5 billion that a New York judge allowed to proceed on September 30; and a mass arbitration campaign on behalf of thousands of US advertisers launched in May. None is quantified in the filing.

Privacy, Russia and the rest

The privacy paragraph is short but specific about subject matter: "ongoing investigations and litigation in the US and the EU, including those relating to our collection and use of location information, the processing controls we offer users, and advertising practices, which could result in significant fines, judgments, and product changes." It does not name cases. On September 21, Ireland's Data Protection Commission fined Google 403 million euros over Android location data collected between 2018 and 2020; the 10-Q does not mention that decision or record a charge for it by name.

Russia gets a sentence of its own. "Some matters concern civil judgments that include compounding penalties imposed upon us in connection with disputes regarding the termination of accounts, including those of sanctioned parties. We do not expect these ongoing legal matters will have a material adverse effect."

The catch-all list of legal exposure is long and now names AI twice. It covers "competition, intellectual property, data privacy and security, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, design of our products and services, personal injury and other tort and nuisance theories, consumer protection, including how we moderate content on our platforms, AI, and other matters." The risk factors add "allegations and trials involving youth-related issues, which could result in substantial fines, settlements, or operational restrictions."

New risk language: agents that act outside their scope

The risk factors section lists only the material changes since Alphabet's annual report for 2025. Several of the changes concern AI agents, and one sentence stands out for its directness.

"During model testing, we have sometimes observed unexpected behavior, including autonomous agents taking actions outside of their intended scope," the filing states. The surrounding text sets out what that could lead to. "As our AI systems increasingly orchestrate multi-step tasks and interact autonomously with third-party tools, applications, and APIs, errors or misalignments in one component may compound across the workflow, potentially leading to operational, technical, or transactional failures, unauthorized actions, or unforeseen liabilities for us or third parties."

Alphabet also concedes it may not understand what went wrong when something does. "In the event of an incident, we may be unable to isolate root causes or detect and respond in a timely manner, and we may face difficulties identifying similar incidents in the future." The consequences listed are severe by the standards of corporate risk disclosure: "Unintended consequences, misalignment, misuse, abuse, or customization of our AI tools and systems, which we may not be able to prevent or control, could lead to severe or catastrophic security and societal incidents." Among the possible outcomes are "orders or requirements to withdraw, retrain, or modify deployed models, and operational shutdowns or injunctions."

Google is not the only AI developer to describe this in public. On October 10, PPC Land reported that Anthropic had cut live web access from all internal tests after Claude models took four kinds of unrequested actions, including submitting live web forms. Six days later, a report by 65 researchers, 36 of them affiliated with Google, argued that consent prompts and static permissions cannot keep up with AI agents that shop and book on users' behalf. The 10-Q does not describe the incidents Google observed, how often they occurred or in which products.

Security: agents as a target and a tool

The security risk factor has been rewritten around agents. "The deployment of and interaction with AI agents presents heightened cybersecurity risks where AI agents may be exploited by malicious actors to facilitate hacking, data exfiltration, privilege escalation, or lateral movement within our systems or the systems of our partners and customers," it states. "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."

Two further sentences are new in their candour. One concerns Google's own engineering: "our increasing internal reliance on AI-driven tools and autonomous agents to assist in writing, testing, and deploying software across our production environments and core infrastructure may introduce undetected vulnerabilities, coding errors, or architectural defects that could degrade system reliability or expose us to heightened cybersecurity risks." The other concerns attackers: "The use of AI to find and exploit vulnerabilities is accelerating timelines on which such vulnerabilities may be discovered and exploited by threat actors."

Attacks, the filing says, "increasingly leverage AI to breach systems, target employees, or impersonate senior management," and the risk is heightened by "geopolitical tensions or armed conflicts, such as the ongoing conflicts in the Middle East and Ukraine." Agentic systems that "execute multi-step actions without adequate human review" could also cause "noncompliance with laws such as the Computer Fraud and Abuse Act," the US anti-hacking statute.

Privacy laws named

The privacy risk factor now lists specific laws: biometric statutes "in Colorado, Illinois, Texas, and Washington"; the Children's Online Privacy Protection Act and "the pending Children and Teens' Online Privacy Protection Act (COPPA 2.0)"; "the New York Child Data Protection Act"; the UK's Age-Appropriate Design Code; California's Internet of Things Security Law; and the EU Data Act, which "introduces new data portability requirements with respect to connected products." It also notes that AI has led "data protection authorities around the world to consider and adopt new and evolving interpretations of data protection laws, imposing specific obligations with respect to the processing of personal data, including required notices, consents, and opt-outs."

Cloud customers in regulated sectors

The risk factor on new businesses has a new passage about Cloud. "Our business with financial services, healthcare, and public sector customers may present additional risks, including regulatory compliance risks. For instance, we may be subject to government audits and cost reviews, and any failure to comply or any deficiencies found may expose us to legal, financial, and reputational risks." It adds that "evolving laws and regulations may require us to make new capital investments, build new products, and seek partners to deliver localized services in other countries, and we may not be able to meet sovereign operating requirements."

Shareholders: what the June raise was made of

In June, PPC Land reported that Alphabet was raising about $85 billion to fund AI infrastructure, made up of a $10 billion private placement with Berkshire Hathaway, an underwritten public offering then reported at $30 billion to $35 billion, and a $40 billion at-the-market programme. The 10-Q itemises the pieces, and the underwritten offering turns out to have been two different securities.

The three June transactions brought in $49.5 billion net, and adding the full capacity of the at-the-market programme gives $89.5 billion, PPC Land's calculation. Counting only what had actually been raised by September 30, the total was $61.9 billion. The filing says the proceeds of the public offering, the private placement and the preferred stock "will be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute."

The 10-Q does not give a separate price for Berkshire's shares. Dividing the net proceeds by the 28 million shares gives roughly $357 a share, close to the public offering prices, PPC Land's calculation from rounded figures.

The preferred stock: a share sale with a delay

The mandatory convertible preferred stock is the least familiar instrument in the package. It pays a cumulative dividend of 6.25% a year on a liquidation preference of $1,000 per share, quarterly on February 15, May 15, August 15 and November 15, and Alphabet can pay it "in cash, shares of common stock, or a combination of cash and shares of common stock, at the company's election." On or about May 15, 2029, every preferred share converts automatically into common stock. The holders have no votes, and Alphabet cannot redeem the shares before then.

How many common shares Alphabet will hand over depends on its share price at the time. Each Series A preferred share converts into between 2.2520 and 2.8160 Class A shares, and each Series B share into between 2.2740 and 2.8420 Class C shares, based on the average price over the 20 trading days before conversion. In practice, PPC Land's calculation from those ratios, three outcomes are possible for the Class A series:

• If Class A stock averages below about $355, roughly the June offering price, holders receive the maximum 2.8160 shares and bear the loss.
• Between about $355 and about $444, holders receive shares worth $1,000, whatever the price.
• Above about $444, a level 25% over the offering price, holders receive the minimum 2.2520 shares and keep about 80% of any further rise.

The Class C series works the same way, with thresholds of about $352 and about $440. Across both series, conversion will create between about 43.6 million and 54.5 million new shares, equal to 0.35% to 0.44% of the 12,294 million common shares outstanding on October 21, PPC Land's calculation.

The dividend is a fixed cost in the meantime. On 385 million depositary shares of $50, the annual charge is about $1.2 billion. Counting the first, shorter dividend of $12.15 per preferred share paid on August 15 and eleven further quarterly payments of $15.63 through May 2029, the total over the life of the stock is about $3.5 billion, PPC Land's calculation. The risk factors acknowledge the trade-off directly: "we are contractually required to make regular dividend payments on our Mandatory Convertible Preferred Stock, which will diminish our cash reserves or cause dilution if we elect to settle in shares."

A $1.0 billion hedge against Alphabet's own dilution

Alongside the preferred stock, Alphabet bought what the filing calls "capped call transactions" from "certain financial institutions," for an aggregate premium of $1.0 billion. The options entitle Alphabet to receive Class A and Class C shares when the preferred stock converts, and they "are intended to reduce the potential dilution to the company's common stock upon conversion of the mandatory convertible preferred stock."

The protection has a ceiling. The cap prices are $532.6704 for Class A and $527.7974 for Class C, "each representing a premium of 50.0% over their respective public offering prices." Because the options are indexed to Alphabet's own stock, they are recorded as a reduction of shareholders' equity rather than as derivatives, so changes in their value do not pass through the income statement. The 10-Q does not name the banks.

The structure means Alphabet raised $19.0 billion in June through an instrument that converts into common stock in 2029, paid about $1.2 billion a year to hold it off until then, and spent $1.0 billion so that, up to a share price 50% above June's, fewer new shares reach the market when it converts.

The at-the-market programme's stated purpose

The equity distribution agreement signed on June 1 allows Alphabet to sell up to $40.0 billion of Class A and Class C stock through sales agents "from time to time," in amounts and at times it chooses. The filing states the purpose plainly: "The proceeds from offerings under the ATM Program are primarily intended to be used to meet tax obligations associated with employee equity grants." It adds that Alphabet "may elect to sell, through the sales agents or through others (whether acting as agent or principal), shares of our stock for forward settlement," which would let it agree a sale now and deliver the shares later.

The quarter's numbers can be set against that purpose. The statement of stockholders' equity records $5,413 million of "tax withholding related to vesting of restricted stock units, and other" in the third quarter, against $12.4 billion of net proceeds from the programme, a ratio of about 2.3 to one, PPC Land's calculation. Over nine months, withholding came to $16,232 million, while all of the programme's sales so far fell in the third quarter. The filing does not say how the remaining proceeds were used.

A buyback authority left untouched

In April 2025, Alphabet's board authorised a $70.0 billion share repurchase programme. At September 30, 2026, $69.5 billion of it remained available, and the filing notes that "the repurchase programs do not have an expiration date." The authority could be used at any time, through open-market purchases, privately negotiated transactions or Rule 10b5-1 plans.

The risk factor on capital returns was written to keep that option open in both directions. "Our share repurchases and dividends could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading prices of our stock." On the common dividend, it says the board "may decide not to declare" one in any quarter.

Share classes and employee awards

The 10-Q's cover page counts shares at October 21: 5,888 million Class A, 827 million Class B and 5,579 million Class C. Class B shares, which carry ten votes each and are held mainly by Alphabet's co-founders, Larry Page and Sergey Brin, convert into Class A shares when sold. Their number fell from 837 million at the end of 2025 to 828 million at September 30 and 827 million on October 21. The filing does not explain the decline.

Employee equity is the other large source of new shares. In the first nine months of 2026, Alphabet granted 155 million restricted stock units and performance stock units at a weighted-average grant-date fair value of $300.12, against $159.75 for the units outstanding at the start of the year. That puts the year's grants at about $46.5 billion, PPC Land's calculation. At September 30, 284 million units were unvested, and $61.8 billion of compensation cost was still to be recognised "over a weighted-average period of 2.8 years." Stock-based compensation expense for the nine months was $23.9 billion, against $17.9 billion a year earlier, an increase of 34%, PPC Land's calculation.

Insiders' trading plans

Item 5 of the 10-Q lists the trading plans that directors and senior officers adopted or changed during the quarter under Rule 10b5-1, which allows insiders to set up sales in advance:

• Ruth Porat, President and Chief Investment Officer, adopted a plan on August 11, 2026, with the first trade scheduled for December 1, 2026, to sell 100,149 target Class C shares from vesting stock units and performance units until December 1, 2027, with a potential maximum payout of up to 200% of the performance units.
• Kent Walker, President, Global Affairs, Chief Legal Officer and Secretary, terminated a plan adopted on May 5, 2025, and adopted a new one on August 31, 2026. It runs until February 23, 2029 and covers 9,767 Class C shares plus all net shares from the vesting of a further 230,315 target Class C shares.
• John Hennessy, Chair of the Board, through a family trust, adopted a plan on July 24, 2026, to sell up to 5,200 Class A and 2,600 Class C shares between November 3, 2026 and October 4, 2027.

No director or officer adopted, modified or terminated any other trading arrangement in the quarter, according to the filing. Sales under the plans will appear in later Section 16 filings.

Inside the segment costs

Previous coverage of the quarter has dealt with segment profits and the $7.7 billion of "Alphabet-level activities," mostly shared AI research, that sit outside them. The 10-Q's segment note adds a supplemental breakdown of each segment's costs into employee compensation and everything else.

Changes are PPC Land's calculation.

The table shows how Google Services widened its margin: revenue grew by 11%, while costs other than pay grew by 6%. That category "primarily include[s] direct costs, such as advertising and promotional activities, inventory and related costs, legal and other matters, and third-party services fees" plus allocated infrastructure, and for Services it also contains content acquisition costs and TAC.

Part of the slower cost growth came from a one-off in the comparison period. The 10-Q attributes the $5.6 billion rise in Services operating income to higher revenue "and a decrease in expenses related to legal and other matters, partially offset by an increase in TAC." Elsewhere it explains that the fall in legal costs largely reflected "the effect of a $3.5 billion EC fine accrued in the third quarter of 2025." The filing also says that "certain fines and settlements" are among the corporate costs not allocated to segments, and it does not state how much of the 2025 fine sat within Google Services. Over nine months, when the comparison is less affected by that fine, Services employee compensation rose 9% and other costs 9%, against revenue growth of 14%, PPC Land's calculation.

The expense lines in the MD&A explain where pay rose. Of the $5.5 billion increase in research and development expenses in the quarter, $3.5 billion came from employee compensation and $802 million from depreciation. In sales and marketing, the $1.6 billion increase was driven by $722 million more in "advertising and promotional activities," Google's own marketing, and $715 million more in employee compensation. Severance and office space reductions are, like hedging gains and losses on revenue, kept out of the segments entirely.

The 10-Q also names the person who judges the segments. "Our Chief Operating Decision Maker (CODM) is our Chief Executive Officer, Sundar Pichai," it states. He uses segment operating income "to allocate resources to our segments in our annual planning process and to assess the performance of our segments, primarily by monitoring actual results versus the annual plan." The segments, it adds, "are not evaluated using asset information," so the $372.8 billion of property and equipment carried at September 30 does not enter the measure by which Alphabet's chief executive judges Search, YouTube and Cloud.

Accounting changes ahead

Three new accounting standards will change what Alphabet reports in 2027 and 2028.

• ASU 2024-03 will require Alphabet to break down "certain expense categories included within the relevant expense captions" in the notes to its income statement. It applies to the annual report for 2027 and to quarterly reports from 2028. Once adopted, the cost of revenues line, which reached $51.4 billion in the third quarter, would be accompanied by its components.
• ASU 2025-06 changes the rules for when the cost of developing internal-use software can be capitalised rather than expensed. It takes effect in 2028. For a company whose spending on AI systems is partly software, the timing of when costs are recognised could shift.
• ASU 2026-02, issued in May 2026, sets out for the first time how to account for "environmental credits and environmental credit obligations," also from 2028, and must be applied retrospectively. Renewable energy certificates and carbon credits are typical examples of such credits; the filing does not say which of Google's holdings or purchase agreements the standard will affect.

For each, the filing says Alphabet is "currently assessing" the timing and the effect. Early adoption is permitted in all three cases.

Why this matters for the marketing community

For advertisers, the clearest new information is the price and volume of Search clicks. An 8% rise in paid clicks and a 4% rise in the average price per click describe a Search advertising business that is still growing on both measures, but more slowly on volume in the third quarter than in the first half of the year. The 10-Q attributes Search revenue growth to "increases in search queries resulting from growth in user adoption and usage on mobile devices; growth in advertiser spending; and improvements we have made in ad formats and delivery," without mentioning AI Overviews or AI Mode, and gives no breakdown by format.

For publishers, the Network figures confirm what Google's partners have reported throughout 2026. Fewer ads were shown on partner sites, AdSense shrank, and AdMob in mobile apps grew. The Network TAC rate rose, so partners received a larger share of each Network dollar, but the filing does not give that rate, and a larger share of a smaller AdSense business does not mean more money for any individual site.

For anyone following Google's competition cases, the legal ledger shows that money has started to move. Alphabet has paid $5.2 billion on the Android fine, booked $2.1 billion for PriceRunner and $1.0 billion for the two DMA fines, and stated that Google "may appeal" the US ad tech remedies. Several of the open private claims, including the UK advertiser case and the mass arbitration, are brought on behalf of advertisers, and for most of them the filing "cannot estimate a possible loss."

The scale of Alphabet's commitments also bears on the advertising business. More than $1 trillion of purchase commitments, leases and guarantees, much of it for AI compute, sits on a company that still earns most of its operating profit from advertising. Google Services generated $39.2 billion of operating income in the third quarter, and the filing records obligations that run past 2031 and, for energy, to 2054. The new risk language on AI agents matters for the same reason. Google is adding agent features to products that advertisers and shoppers use, and the filing now says such agents have acted outside their intended scope in testing and could be manipulated by attackers.

What the filing does not say

The 10-Q leaves several questions unanswered.

• It does not show how many paid clicks or how much revenue came from AI Overviews, AI Mode or Gemini, and the Search drivers it lists do not mention AI.
• It does not explain why Network impressions fell 14% and cost-per-impression rose 14% in a quarter when Network revenue grew.
• It does not name the counterparties behind the $98.5 billion of backstops and guarantees, the $6.0 billion short-term lease, the $20 billion equity derivative, the capped calls or the buyers of TPUs with repurchase rights.
• It does not say when Crux AI's $16.8 billion contract will turn into revenue beyond the general schedule for the whole backlog.
• It does not describe the incidents in which "autonomous agents" took "actions outside of their intended scope," how often they occurred or in which products.
• It does not say whether Google will appeal the US ad tech remedies, or how much the Texas trial or the private ad tech claims could cost.
• It does not give the total value of the SpaceX holding, only the part under short-term restrictions.
• It does not explain how the at-the-market proceeds beyond employee tax obligations were used, or why the number of Class B shares fell.

Timeline

• September 18, 2024 - The EU General Court annuls the 1.49 billion euro AdSense for Search fine
• October 2024 - US court issues the Epic Games remedies decision that Google is now complying with
• April 2025 - Alphabet's board authorises a $70.0 billion share repurchase programme
• September 5, 2025 - The European Commission fines Google 2.95 billion euros over ad tech
• October 30, 2025 - Alphabet reports third-quarter 2025 results, including a $3.5 billion EC fine charge
• November 9, 2025 - Google and Epic propose a settlement modifying the Android injunction
• December 23, 2025 - Google agrees to buy Intersect for $4.75 billion
• January 8, 2026 - PPC Land reports the $32 billion Wiz deal faces a February EU deadline
• January 16, 2026 - Google files notice of appeal in the DOJ search case
• March 10-11, 2026 - Alphabet completes the Intersect acquisition for $5.9 billion and the Wiz acquisition for $29.5 billion
• March 2026 - Google settles with Epic and withdraws its Supreme Court petition
• April 30, 2026 - Alphabet reports first-quarter Network ad revenue down 4%
• May 17, 2026 - A mass arbitration campaign targets Google over ad overcharges
• May 22, 2026 - Google asks the appeals court to overturn the search monopoly ruling
• June 1, 2026 - Alphabet signs a $40.0 billion at-the-market equity agreement
• June 4, 2026 - Public offering of 58 million shares and Berkshire Hathaway private placement completed; PPC Land reports the $85 billion raise
• June 5, 2026 - Alphabet issues $19.0 billion net of 6.25% mandatory convertible preferred stock and buys $1.0 billion of capped calls
• July 1, 2026 - Swedish court rules for PriceRunner; PPC Land reports the damages on July 18
• July 2, 2026 - Google loses its final appeal against the Android fine
• July 2026 - Google and Epic withdraw their joint motion to modify the Play injunction
• July 20, 2026 - Brussels orders Google to share search data with rivals
• July 23, 2026 - The Commission fines Google 890 million euros under the DMA; Alphabet reports second-quarter results
• July 24, 2026 - Publishers report ad supply down as much as 40%
• August 5, 2026 - UK tribunal certifies a 5 billion pound advertiser claim
• August 10, 2026 - Alphabet documents a new issue of US dollar notes due from 2028 to 2066
• September 2, 2026 - Judge Brinkema rejects the AdX divestiture
• September 16, 2026 - Bloomberg reports Crux AI's $22 billion debt financing to buy TPUs
• September 21, 2026 - Ireland's DPC fines Google 403 million euros over location data
• September 29, 2026 - Google removes live prices and trip dates from EU search
• September 30, 2026 - Quarter ends; a New York judge lets Gannett and Daily Mail ad tech claims proceed
• October 2, 2026 - DOJ and Google file a joint proposal on opening the ad exchange
• October 2026 - Google appeals the two DMA fines
• October 10, 2026 - Anthropic cuts web access from internal tests after Claude workarounds
• October 16, 2026 - 65 researchers argue consent cannot keep up with AI agents
• October 21, 2026 - Share count date for the 10-Q cover: 12,294 million common shares
• October 24, 2026 - PPC Land reports Meta's quarterly filing and its $810 billion of commitments
• October 26, 2026 - Anthropic's IPO exhibits show Google's compute and note agreements
• October 28, 2026 - Alphabet reports third-quarter results and files its Form 10-Q
• November 15, 2026 - Preferred stock dividend of $15.63 per share payable
• December 1, 2026 - First trade scheduled under Ruth Porat's new trading plan
• May 15, 2029 - Mandatory conversion date for the preferred stock

Related PPC Land coverage

• Alphabet raises $85 billion to bet everything on AI infrastructure - The June financing announcement, before the 10-Q itemised its parts.
• Google Search ads gain 17% to $63.3 billion while Network drops 1% - Alphabet's second-quarter results, the comparison point for the backlog and Network figures.
• Alphabet Q1 2026: Google Network ad revenue falls 4% as AI reshapes the web - The first-quarter results and the start of 2026's Network decline.
• Publishers threaten to cut Google off as ad supply falls 40% - Ozone's benchmarking data on open web ad supply.
• Google optimises its own revenue. Advertisers have to optimise theirs - Analysis of how auction pricing serves Google's revenue.
• Amazon, Google and Microsoft hold $269bn of Anthropic compute contracts - The compute deals that sit behind cloud backlogs.
• Anthropic IPO exhibits show 9% interest on Broadcom's $42bn chip notes - Google's note purchase agreement with Anthropic and the TPU leasing chain.
• Meta books reserve for $25bn New Mexico penalty, quarterly filing shows - The equivalent filing from Meta, with its own commitments table.
• DOJ loses AdX divestiture bid as Brinkema accepts behavioral remedies - The ad tech remedies ruling Google says it may appeal.
• Google faces 5bn UK advertiser claim as tribunal certifies opt-out case - One of the private claims the 10-Q does not quantify.
• Google loses 950 million pounds as court finds shopping abuse never stopped - The PriceRunner damages ruling behind the $2.1 billion charge.

Summary

Who: Alphabet Inc., Google's parent company, with its Search, YouTube, Network and Cloud businesses; advertisers, publishers, lenders and investors whose money flows through them; and the courts and regulators in the US and Europe that hear its cases.

What: Alphabet's quarterly report on Form 10-Q shows paid clicks up 8% and cost-per-click up 4% in the third quarter, Network impressions down 14%, a $567.7 billion revenue backlog that includes a $16.8 billion contract with Crux AI, $6.6 billion of TPU sales with buy-back rights, $924.4 billion of purchase commitments, $130.5 billion of leases not yet started, $98.5 billion of backstops and guarantees, a $5.2 billion Android fine payment, a $1.0 billion DMA charge, new risk language on AI agents acting outside their scope, and the terms of the June equity raise, including a $19.0 billion mandatory convertible preferred stock and $1.0 billion of capped calls.

When: The 10-Q covers the quarter ended September 30, 2026, is dated October 28, 2026, and reports share counts as of October 21, 2026. Its commitments run beyond 2031, its energy obligations to 2054, and the preferred stock converts on or about May 15, 2029.

Where: Alphabet's operations worldwide, with 77% of its long-lived assets in the United States, and legal proceedings in the US, the European Union, the UK, Sweden and Russia.

Why: Alphabet is financing an AI build-out larger than its operating cash flow with debt, new shares, preferred stock, long-term contracts and guarantees, while the advertising business that produces most of its profit grows more slowly in click volume and faces a growing number of regulatory decisions and private damages claims.