Google Cloud doubled. Search grew more slowly, and the cash went out the door

Alphabet’s release for the quarter ended 30 September puts revenue at $127.6 billion, up 25 percent. Google Cloud is the line that changed shape: $30.7 billion, up 103 percent from $15.2 billion, which the company credits to AI infrastructure, AI products, and the rest of the cloud platform. Sundar Pichai, in the remarks Google posted, said demand for TPU systems is strong across customers and that the company is still trying to bring capacity online. A cloud that doubles is a real change in the mix. It is not, by itself, a count of robots or models a customer finished a job with.

Search is still the larger business, and it grew more slowly. Google Search and other was $63.4 billion, up 12 percent, after 17 percent in the second quarter and 19 percent in the first, as later coverage of the call laid out. Pichai’s own line, in the same remarks, is that query growth was the fastest in five years, including commercial queries. More questions and slower ad growth can both be true. Philipp Schindler, the chief business officer, told investors that AI Mode is monetised less heavily than a classic search, which is why the company is now putting ads into AI Mode in more countries and, in the United States, into the follow-up turns of a conversation. He also said click-through rates on sponsored product listings inside AI Mode are already comparable to organic listings. That is the company’s test of its own ads. It is not a published price for a chat.

The cash is the part that does not fit on a growth slide. Purchases of property and equipment were $51.4 billion in the quarter. Cash from operations was $42.3 billion. The gap is why reports of the results put free cash flow at about negative $9.1 billion, and why the shares fell about 10 percent after the close. Full-year spending on equipment is still guided at $195 billion to $205 billion. Holding that range, rather than raising it, was read as a delay in capacity, not as a smaller ambition. Alphabet’s finance chief said outside computing power arrived only at the very end of the quarter.

Microsoft, the same day, is the comparison that keeps the quarter from being only Google’s. Revenue was $92.28 billion, up 19 percent. Azure, disclosed in dollars for the first time, was $33.2 billion, up 48 percent. Capital expenditure and finance leases were $45.2 billion, short of what analysts had expected, and the company cut its longer spending plan: coverage of the call has the chief financial officer aiming above $50 billion next quarter and at $170 billion for calendar 2027, down from a higher figure, because third-party suppliers of AI chips slipped and some of that capacity moves into the first half of 2027. Free cash flow, unlike Alphabet’s, stayed positive. Two companies spent the quarter buying computers they could not all switch on. The machines are the constraint. The press releases do not say whose rack was late.