Key Highlights

● Google Cloud revenue reached $30.71 billion, beating estimates.

● Search revenue of $63.35 billion missed forecasts.

● YouTube ad revenue also came in below expectations.

● Net income fell to $26.17 billion from $34.90 billion.

Google Cloud delivered the standout number in Alphabet's third-quarter report on Wednesday, October 28. It was not enough.

Alphabet (NASDAQ:GOOGL) slid sharply in extended trading after the Google parent missed forecasts on earnings, overall revenue and its core advertising businesses, and reported negative free cash flow. Reports differed on the exact size of the after-hours decline. In the regular session, Alphabet's Class C shares had risen to close at $321.89.

Cloud Shines

Google Cloud revenue reached $30.71 billion, beating the $29.1 billion analysts had expected. The cloud unit sells computing power, data storage and AI tools to businesses, and it has become a central part of Alphabet's AI strategy as companies rent capacity to train and run models.

Alphabet also said its Gemini app has reached 1 billion users, another sign of traction for its AI products.

But the Core Missed

The rest of the report told a different story. Search revenue of $63.35 billion fell short of the $64.85 billion forecast. YouTube advertising revenue of $11.21 billion missed the $11.43 billion estimate. Total revenue of $127.6 billion grew at a double-digit pace but came in just below the $127.9 billion expected.

Earnings were the biggest disappointment. Alphabet earned $2.12 a share, far below forecasts that sources put at $2.99 or $3.03. Net income fell to $26.17 billion from $34.90 billion a year earlier, with a loss on equity stakes weighing, according to reports. Search remains Alphabet's largest profit engine, so a miss there carries more weight than a beat in cloud.

Cash Flow and Capex

Free cash flow turned negative, at roughly minus $9.06 billion by reported figures. Alphabet also raised its 2026 capital spending forecast to between $195 billion and $205 billion, even though third-quarter capex of $51.36 billion came in below the $55.78 billion consensus.

Supporters of the spending point to cloud, since data centers and chips are what power Google Cloud's growth. But heavy investment combined with negative cash flow and an earnings miss made for a difficult mix. The contrast with Microsoft (NASDAQ:MSFT) was stark: Microsoft rose after the bell after beating revenue forecasts and reporting accelerating growth in its Azure cloud business, with Microsoft Cloud revenue reaching $63.9 billion.

What to Watch

During the regular session, the S&P 500 rose 21.38 points to 7,743.98, its third straight gain, and the Nasdaq Composite added 72.04 points to 26,549.85. After hours, Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU) dipped in sympathy with Alphabet, and Nasdaq-100 futures pointed lower overnight.

Thursday's open will reveal whether Alphabet's after-hours losses hold. Amazon (NASDAQ:AMZN), owner of the largest cloud provider, Amazon Web Services, reports after Thursday's close, giving investors a direct comparison on cloud growth. Meta (NASDAQ:META) and Apple (NASDAQ:AAPL) report later this week.