Ren
Head of AI, Ex-Product Manager, AI Supply-Chain Bottlenecks
Alphabet's business is bigger and more profitable across the board, while its stock is back at its March war-scare low. That makes it hard not to pour all future earnings into the stock. Quarterly revenue rose from $110B to $128B; Google Cloud growth accelerated from 63% to 103%, with $30.7B in quarterly revenue, an operating margin around 36% and profit more than tripling in a year. Search queries are growing at their fastest pace in five years. x.com
Alphabet owns more layers of the AI stack than any other company yet is priced like the search business AI was supposed to kill. Search grew 17% to $63.3B, and Cloud grew 82% to $24.8B as its operating margin rose from 20.7% to 35.6%; Cloud backlog hit $514B. At about 22x forward earnings, it is cheaper than Microsoft at 25x while growing faster. It lagged OpenAI and Anthropic on models this year, and Gemini 4 Argon, which Sundar Pichai says shows frontier performance, may be the spark. x.com x.com
Alphabet remains fundamentally strong because revenue rose 25%, Cloud grew 103% to $30.7B with record margins, and search queries reached a five-year high. Ads grew 12% instead of 17% expected, while 2027 capex rises again, so the market is repricing it from a cash-printing ad company into an AI spender. x.com
Alphabet's AI Mode monetizes less effectively than traditional Search, potentially threatening its Search business. AI drove the fastest Search query growth in five years, yet Search revenue growth slowed to 12%; defending Search makes even greater AI investment necessary, not optional. Google Cloud grew 103% year over year to a $123 billion annual run rate. The report could not have been better for the AI infrastructure trade, but its risks are bearish for Alphabet's stock. x.com
Alphabet's core Search growth is slowing while AI spending surges, making the selloff look deserved despite fast Cloud growth. Search growth fell from 19% to 17% to 12% over three quarters; Search now represents just under half of revenue. The stock could fall to $250, though Amazon is the preferred buy. x.com x.com x.com x.com x.com
Alphabet's AI-mode ads could move the needle, giving the stock a tentative upside bias despite search uncertainty. Search supplies $39b of $41b in quarterly segment profit, but its revenue growth slowed to 12% and will likely slow to 10% in Q4. Queries remain healthy; Alphabet says AI queries are mostly additive. Cloud revenue grew 96% year over year. At 18x a slightly above-consensus 2027 GAAP EPS estimate for over 30% operating profit growth, the stock remains a tough call. x.com x.com x.com
Google Cloud's surging revenue and improving profitability make dumping Alphabet stock look perverse. Q3 revenue rose from $15.16 billion to $30.71 billion year over year, while operating income climbed from $3.59 billion to $11.12 billion and margin rose from 23.7% to 36.2%. x.com
Alphabet's search business faces disruption as AI alternatives start to replace traditional searches, even though the shift has yet to hurt revenue. Search still grew 12%, as predicted, but this may be its last double-digit result. Early Uber use in San Francisco likewise preceded taxis losing share. Alphabet's impressive cloud growth accounts for only a quarter of revenue. x.com x.com x.com x.com x.com x.com
Alphabet's Q3 cash-flow deficit reflects front-loaded AI infrastructure spending, a $5.2B fine payment and a TPU inventory build, not a broken cash engine. With capex at $51.4B, Google Cloud revenue doubled to $30.7B (+103%), operating profit tripled to $11.1B and backlog hit $561B. Search queries remain at all-time highs as users shift to Gemini formats. The spending should monetize over 4–8 quarters; return on invested capital matters more than next quarter's expectations. x.com x.com
Slower Google Search growth adds to doubts about paying a premium for Alphabet. Search revenue rose 12% year over year to $63.4 billion in Q3 2026, down from 17% the prior quarter and 19% two quarters earlier; even that 19% figure did not pass the smell test. Google remains a great company, but its stock would be worth buying at a lower price. x.com x.com
Alphabet's search revenue is unlikely to reaccelerate sustainably as zero-click searches erode its revenue opportunity. Zero-click searches now account for 68% of searches, up from 60% in 2024, and cloud is not yet as profitable as search, limiting its ability to offset the problem. x.com x.com
Alphabet's rapid cloud growth and diverse profit sources make it a long-term buy below 20x forward earnings. Cloud grew 103% this quarter, despite short-term fears about search and heavy spending. x.com
