My notes on the third quarter ;-)

Alphabet-GOOGL delivered strong underlying performance for the third quarter of 2026, marking its 13th consecutive quarter of double-digit top-line growth. Driven by accelerating AI investments, revenue climbed 25% to $127.6 billion, and operating income jumped 30% to $40.6 billion. However, net income and EPS fell by 25% and 26% respectively, dragged down by an $8.2 billion unrealized loss on the company's SpaceX investment.

To evaluate the core economics of Alphabet's business, investors should focus on its operating performance, as future net earnings will likely remain volatile due to fluctuations in its market-valued assets (including SpaceX and a 15% stake in Anthropic).

Segment Performance & Product Milestones

Google Services
• Revenue: Reached $96.3 billion, an 11% increase.
• Search: Grew 12%, achieving its highest year-over-year query growth in five years, boosted by AI integration.
• Subscriptions: Surpassed 150 million YouTube Music and Premium subscribers globally (including trials).

Google Cloud & AI Ecosystem
• Revenue: More than doubled to a record $30.7 billion, propelled by intense demand for AI infrastructure and solutions.
• Product Depth: Features a highly diversified portfolio, with over 18 products each generating more than $1 billion in revenue.
• Backlog: Stands at $561 billion, with 55% expected to be recognized as revenue over the next 24 months.
• Hardware: TPU system sales served as a meaningful growth engine across a base of over 100 customers.
• Gemini Scale: Gemini 4 Argon and Carbon lead frontier AI models. Processing volume surged to nearly 32 billion tokens per minute—up 40% sequentially and
a fourfold increase year-over-year.
• Gemini App: Officially hit 1 billion users, becoming the fastest-growing product in Alphabet's history.

Margins, Financing, and Capital Allocation

Profitability & Margins
• Operating Margin: Expanded by 100 basis points to 31.8%.
• Net Income / EPS: Declined to $26.2 billion and $2.12, respectively, due to the non-operating SpaceX valuation adjustment.

Capital Expenditures & Cash Flow
• YTD Operating Cash Flow: Rose 13% to $127.1 billion.
• YTD Capital Expenditures: More than doubled to $132.0 billion.
• Free Cash Flow: Turned negative at -$4.8 billion for the first nine months due to heavy infrastructure spending.
• Dividends: Distributed $8.2 billion in dividends during the first nine months.

Capital Raising & Liquidity
To fund aggressive AI investments, Alphabet pulled multiple financing levers during the quarter:
• Equity: Issued 12 million Class A shares (net proceeds of $4.3 billion) and 24 million Class C shares (net proceeds of $8.1 billion).
• Debt: Issued unsecured notes netting $28.7 billion.

Balance Sheet & Outlook
Financial Position (Quarter-End) Metric
Cash & Marketable Securities >$265.0 Billion
Long-Term Debt (Nearly tripled YoY) $125.1 Billion
Shareholders' Equity $677.5 Billion

Note: These figures omit substantial unrecorded commitments for upcoming AI developments.

• Forward Guidance: Management reaffirmed its 2026 capital expenditure outlook of $195 billion to $205 billion.
• Long-Term Trajectory: Capex is projected to increase significantly in 2027 to capture robust ongoing market demand.