REVENUEMiss -0.3%
EPSMiss -29.6%
Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|---|---|---|
| Revenues | $127.58B | $127.97B | ▼ Miss -0.3% |
| EPS(GAAP diluted) | $2.12 | $3.01 | ▼ Miss -29.6% |
Highlights & what matters
- Revenue of $127,577 million came in 0.3% below the $127,967 million estimate; diluted EPS of $2.12 missed the $3.01 estimate by 29.6%.
- The EPS gap sits below the operating line: other income (expense), net was negative $8,221 million against positive $12,759 million a year ago, and the release states the $8.7 billion equity-securities loss alone cut diluted EPS by $0.55.
- Google Cloud doubled: revenue of $30,709 million against $15,157 million, with segment operating income of $11,121 million against $3,594 million. Operating income rose 30% to $40,576 million on a 31.8% margin.
- No financial guidance is given. Capital intensity stepped up hard: purchases of property and equipment of $51,355 million against $23,953 million, leaving quarterly free cash flow at negative $9,065 million.
- The one thing that matters: the headline EPS miss is an investment mark, not the business. Operating income grew 30% on 25% revenue growth, and Cloud at $30,709 million of revenue and $11,121 million of operating income is now the engine.
Key metrics
| Metric | Reported | Prior year | Change |
|---|---|---|---|
| Google Cloud revenues | $30.7 billion | 15,157 | 103% |
| Google Services revenues | $96.3 billion | 87,052 | 11% |
| Operating income | $ 40,576 | $ 31,228 | 30% |
| Operating margin | 31.8% | 31% | — |
| Free cash flow (Q3 2026) | $ (9,065) | $ (5,855) | — |
| Purchases of property and equipment | (51,355) | (23,953) | — |
Guidance changes
No financial guidance change disclosed.
Quality of earnings
- Reported earnings understate the quarter. Operating income rose 30% to $40,576 million while net income available to common stockholders fell to $26,170 million from $34,979 million — the swing is other income (expense), net, not operations.
- Cash generation has inverted. Operating cash flow of $42,290 million was below the $48,414 million of a year earlier while capex rose to $51,355 million, putting quarterly free cash flow at negative $9,065 million and trailing-twelve-month free cash flow at $19,747 million.
- No share-count help. Diluted shares rose to 12,368 million from 12,203 million, buybacks were zero against $11,504 million a year ago, and $298 million of preferred dividends now sit between net income and the common line.
Gotchas & watch items
- Underlying earnings are better than reported: the release states the $8.7 billion equity-securities loss reduced the tax provision by $1.9 billion, net income by $6.7 billion and diluted EPS by $0.55.
- The build is debt- and equity-funded: long-term debt of $125,102 million against $46,547 million at year-end 2025, with $28.7 billion of notes issued in the quarter and $12.4 billion of stock sold under the ATM program.
- Cloud's growth is partly hardware: the release credits TPU systems sales as a meaningful contributor to the 103% increase, and inventory rose to $13,308 million from $2,439 million at year-end.
- Services growth is narrower than the total: Google Services rose 11% to $96,302 million while Google Network was almost flat at $7,455 million against $7,354 million.