$GOOGL · Daniel Pronk · 2026-10-28

Google's stock is down more than 11% right now after the company just announced its third-quarter results . Clearly, the market did not like what it saw in this report, despite Google Cloud growing by more than 100% year-on-year, which is crazy by any measure.

This also means that Google's stock is correcting by about 30% from its all-time highs, which means it is one of the biggest corrections the stock has seen in the past decade. So in today’s video, I want to review Google’s earnings results for the third quarter of 2026 and explain all the positive and negative aspects.

When I was reviewing Google's earnings report , it started off very well, but as I continued reading, I found more and more things that made me say, "Oh, the market probably isn't going to like this."

So in my opinion, there are some justifications for the after-hours selling right now, but we'll discuss whether I think it's overdone and whether Google stock looks cheap right now.

Okay, let's start from the top here, where we can see that revenues rose by 25% year-over-year to $127.6 billion , which means that Google's revenues continue to accelerate.

Google's services revenue rose by 11%, with Google's search engine growing by 12%. However, Google Cloud revenues increased by 103%. This is absolutely crazy, and Google Cloud's revenue growth rates continue to accelerate.

What should be noted here is that sales of Tensor Processing Units (TPUs) are now included in Google Cloud revenue, and part of the accelerated revenue growth is due to the presence of some kind of new revenue stream in this figure.

Overall, Google has now reached an annual revenue rate of $500 billion, and Sander says that AI investments are driving up search queries to all-time highs . He also shares with us that the "Gemini" service has reached one billion users, making it the fastest-growing product in Google's history.

YouTube now has more than 150 million paid subscribers.

Overall, Google Cloud stands out here, while the rest of Google's business is growing much more slowly, which we will discuss later.

Moving to the next screenshot, we can again see that revenues have increased by 25% compared to 15% growth in total revenues last year. Therefore, Google's overall revenue is experiencing a significant acceleration.

The company also achieved $40.6 billion in operating income with an operating profit margin of 32%, with the operating profit margin expanding year on year as well. Overall operating income also increased by 30%.

However, we can see that net income and earnings per share have decreased on a year-on-year basis. The headlines, analysts, and the market won't like this, but it's really a meaningless metric at the moment.

Google now has significant fluctuations in its earnings due to unrealized investment gains . Therefore, profits are not a good measure or reflection of the company's true profitability right now.

Interestingly, Google's operating cash flow actually fell by about $6 billion year-over-year in the third quarter, but it remains high since the beginning of the year and now stands at $127 billion.

In my opinion, the market will not like a decrease in operating cash flows, especially when Google invests so much in capital expenditures. However, there is a lot of noise in the cash flows now as well, just like the earnings.

And also just as there was a lot of noise in Meta's cash flow statement this quarter.

For example, there is a negative impact of $1.5 billion from accounts receivable, $2.7 billion from inventory growth, $3 billion from increased income taxes paid this quarter, $7.8 billion from other asset investments, and a $9.1 billion difference in other liabilities.

Therefore, Google faced obstacles from accounts receivable, the timing of the company's tax payments, building more inventory, and paying off some debts.

This is the same story since the beginning of the year, but cash flows have remained high since the beginning of the year. But at the moment, I think operating income might be the clearest measure of Google's value.

However, the company also has negative free cash flow . And this is another thing I think the market will not like. It has generated $9 billion in negative free cash flow this quarter, and negative $4 billion year to date .

They also halted share buybacks, obviously, because they have raised $42 billion in cash through dilution so far this year. Google has also begun reducing its shareholders' stakes , as its business is generating negative free cash flow and needs additional liquidity to continue investing in artificial intelligence development.

Therefore, Google is similar to Meta and Amazon, as it has become negative free cash flow in order to build AI infrastructure. I believe that investors should expect this situation to continue for the foreseeable future.

Moving on to the next , the following screenshots are from this quarter's earnings presentation. Once again, we see revenue growth of 25%, Google search growth of 12%, Google Cloud growth of 103%, one billion Gemini users, and 32 billion tokens per minute, up 40% from the previous quarter and double the number from the first quarter.

And again, Google has 150 million YouTube Premium subscribers.

So, the business as a whole is still growing, and the growth of the cloud business is amazing.

Moving to the next segment, we see that subscription revenues increased by 11% year-on-year. Google's network rose by 1%, YouTube's ad revenue increased by 9%, and Google search rose again by 12%.

I consider this group of businesses and revenues to be Google's core activities, and as a whole it has grown by 11% year-over-year.

Its growth rates also slowed to 11%, compared to 14% last year. Thus, Google, with the exception of Google Cloud, is experiencing a significant slowdown in revenue and low double-digit growth.

This is another thing I think the market won't like.

However, the operating margin for the core business expanded to 40.7% , and the operating income for this group grew by 16.7% year-on-year. Moving to the next slide, we see Google Cloud's revenue and operating income.

As you can see, this sector is experiencing explosive growth. Revenues accelerated to a growth rate of 103% and the operating margin expanded to 36.2%. This means that Google Cloud's operating income has grown by 208% year-over-year, which is absolutely insane.

This slide also shows us that Google Cloud has now become the main driver of growth for Google's entire business.

I've also set up some charts of historical growth rates for Google's core business since the third quarter of 2025. So, I went back and reviewed every quarterly report over the past year to show you how much Google's core business has slowed down.

Subscription revenue grew by 21% last year in the third quarter, and YouTube ads saw growth of 15%. Search revenues also peaked in the first quarter with 19% growth , then have now slowed to 12%.

As you can clearly see , Google's core business is slowing down,

which is also interesting because Meta's business continues to achieve growth rates exceeding 20% and maintains growth of around 25%. So, to me, the fact that Google's advertising activities are slowing down while Meta continues to grow by more than 25% makes Meta's earnings look much better by comparison.

This is another graph I have prepared to illustrate the substantial slowdown, and you can clearly see that since the first quarter of this year, growth rates have declined significantly.

I think this is one of the main things that the market will not like this quarter.

Moving on to another topic, let's talk about Google's capital expenditures. Here you can see that capital expenditures are increasing explosively, reaching $51.3 billion in the last quarter .

Capital expenditures grew by 114% year-over-year, once again causing Google's free cash flow to be negative for the quarter.

The following slide shows us the direction of operating cash flows and free cash flows. We can see that operating cash flow decreased by 13% year-on-year, while free cash flow turned negative.

And this, again, is another thing the market will not like in this earnings report.

Another thing I do every quarter is track the growth of advertising revenue for Google, Meta, and Amazon. However, this first graph is the net additions in advertising revenue for each quarter .

You can see that Meta is the victor. Meta added $13 billion in advertising revenue in the third quarter compared to $7.8 billion for Google. This means that Meta is attracting more advertising dollars than Google and is growing faster now.

I also do the same thing with the figures for the past 12 months . Here you can see that Meta is following Google's advertising activity. At this rate, Meta is on track to overtake Google in the next two quarters.

This will officially make Meta the world's largest digital advertising company. And again, I think this will happen very soon.

The next slide shows the total growth in advertising revenue for these companies since the second quarter of 2021 when they began tracking these metrics. Here we can see that Meta continues to grow strongly, while you can notice that Google's advertising activity is slowing down.

Meta has achieved overall growth of 131% compared to 100% for Google since the second quarter of 2021.

So, let's now talk briefly about the evaluation of Google. Well, in the twelve months since this report, the company has generated operating income of $157 billion. This puts Google at about 24.5 times operating income when we take into account the stock's 11% drop in after-hours trading now.

Here on the Stock Unlock platform, we can see that Google’s long-term average price-to-operating cash flow over the past decade is around 24.3, meaning that Google is now back to its historical average price-to-operating income multiple.

This also means that Google's price premium has almost disappeared now.

If it can maintain this multiplier going forward, the share price should follow the growth of the underlying business and its underlying operating income. So , personally, I don't think Google is overrated here.

And now it seems to be fairly assessed in my opinion. Especially since "Google Cloud" is growing tremendously.

Okay , I just finished listening to the conference call, and I have a few highlights I want to quickly add to this video because Google's stock was dropping during the call. Here are my quick notes.

The first point is that Google stated that margins will be affected in the future, especially in the fourth quarter of this year, because they are using more third-party computing resources that did not appear in the third quarter figures.

They also stated that building massive infrastructure will impact profits and losses as depreciation continues to rise as a result of all their capital expenditures and development of artificial intelligence.

They kept their 2026 capital expenditure guidance within range, but said 2027 spending would increase significantly, just as Meta also indicated.

As discussed, inventory building this quarter was also for Tensor Processing Units (TPUs), which significantly impacted operating cash flows.

For fourth-quarter revenue, they will face greater headwinds due to currency fluctuations, which will have a particularly strong impact on YouTube and search. Therefore, we may see YouTube and search growth rates slow down further in the fourth quarter.

They then said that demand for artificial intelligence still far exceeds supply, which is why the company is investing heavily in capital expenditures and AI development because they are still missing out on potential revenue.

Finally, they said that the growth of AI-mode queries has negatively impacted the growth of search revenue , especially since monetization from AI-mode is lower than it is in search so far.

The market did not like this or react well to it, because Google essentially acknowledges that its AI model reduces search revenue and profitability.

As always, I created a final slide summarizing my thoughts and conclusions about Google and this earnings report. Starting at the top, Google Cloud's growth has been phenomenal and was certainly the highlight of this quarter.

Google Cloud's revenue is doubling year-on-year as margins expand and it achieves $30.7 billion in quarterly revenue .

However, Google Cloud's revenue now includes sales of Tensor Processing Units ( TPUs), which helps to accelerate overall revenue. Google Cloud has now become the growth engine for the entire Google business.

However, Google's traditional core business is slowing down, and quite rapidly, especially since the beginning of this year. YouTube's advertising revenue has returned to growth of less than 10%, and search and subscription growth is also slowing down.

This feeds into the narrative that chatbots and large language models slow down Google's search speed.

In other words, without Google Cloud , Google's numbers would have been truly disappointing, and the stock market might have punished it.

It is also clear that Meta is winning in the field of digital advertising and attracting more advertising revenue. The market will not like a decline in operating cash flow and profits, but in my opinion it makes no sense at the moment.

Operating income appears to be the best metric for evaluating Google at the moment.

Despite this, overall, Google's business is still growing very well . I mean, again, revenue grew by 25 % and operating income grew by 30%, and at the same time , I think the share price premium has now faded.

The stock appears fairly valued at around 24.5 times operating income, at least in my opinion, especially compared to how the market has historically valued this business.

If you also take into account that Google's business is accelerating and becoming more diversified, you could argue that, compared to its history, it should still be trading at the premium it has been at for roughly the past six months.

But overall, I still think Meta and Amazon are cheaper, and my focus will be on buying more Amazon and Meta shares in my portfolio rather than adding more Google here, simply because I think those companies still offer much greater value.