$GOOGL · Jose Najarro Stocks · 2026-10-29

Which just announced its earnings, and unfortunately its stock has fallen by about 10%.

Okay, let's start with Google, shall we? As for Google Cloud, the first thing we see is that it has crossed the $30 mark for the first time. This was a 103% year-on-year increase.

Now, this is very exciting, isn't it? It kind of shows that Google's investment in AI infrastructure is paying off, doesn't it? It works. You are experiencing tremendous revenue growth.

They are among the fastest growing companies, and are currently the fastest growing in the field of cloud computing.

So, theoretically, this is a company that is gaining market share. The great thing is that as they gain market share, they will be able in the future to sell more and offer more solutions to the customers they acquire, making Google Cloud a better business.

Now, Google Cloud has started to generate operating profits. Our most recent quarter was 36.2 for the third quarter in cloud operating margins, up from 35.6 in the second quarter of 2026 and around 32.9 in the first quarter of 2026.

So, over the past two years since the first quarter of 2026, we continue to see sequential growth in cloud operating margins.

Now, they have stated that TPU systems contribute significantly. So, they're selling chips now, right? That became a good part of the job. I also wonder if this is the reason. We will take a closer look at some of the reasons for the stock's decline, but this may be one of them, right?

The market is saying: "Sure, you're doing a good job with Google Cloud, but do TPU systems help make it look a little better than expected?"

The great thing about TPU systems is that they are getting a lot of different customers now, which is very exciting for them. If there is a truly negative indicator in Google's AI story, it is the search sector.

Research has grown by 12% year-on-year, but its pace is slowing compared to what we have seen in the past few quarters.

The last quarter was an exciting time for the research sector because of the impact of the World Cup, an event that doesn't happen very often, does it? It happens every 4 years, so it was a very big and special quarter for them because of that event.

But Google mentioned two things. They stated that apart from the impact of the World Cup in the last quarter, they have witnessed a tremendous change. One of the biggest challenges was currency exchange rates, which created an impact and an obstacle here for the third quarter on a sequential basis.

The second thing they mentioned, and I think this is what excites some investors and pessimists, isn't it? Some investors feel somewhat skeptical. They noted that "AI-powered overviews" are consuming search activity a little faster than expected, and that this feature is not generating revenue with the speed and power of traditional search.

So, I wonder if the market is backtracking to say, "Hmm, we used to talk about AI killing research." "And now you're telling us that AI-powered overviews are already doing that."

On the bright side, the business is still growing despite its self-destruction, but this is something that may worry investors. Regardless, they stated that their investments in artificial intelligence are driving increased usage and growth in total queries, including business queries.

Therefore, the artificial intelligence market remains very strong for them in terms of demand.

Unfortunately, this is now the second quarter in which they have recorded negative free cash flow, at around 9.1 billion in this last quarter. They were hit by some one-off charges this quarter, making their free cash flow even worse.

However, we can now see two consecutive quarters in which the company has recorded negative free cash flow, something the market probably did not expect to happen so quickly.

There are three ways Google can profit from artificial intelligence: search, cloud, and Tensor Processing Unit (TPU) systems. Cloud services and GPUs are working very well. The question at the moment is more about the research market.

So, if there's a reason why Google's stock has fallen in the short term, it's that fear, that fear in the artificial intelligence and search industries.

But overall, in the long run, the company looks to be in an excellent position, especially in the Google Cloud market.

We have just seen that Google's free cash flow is also negative. Once again, Google is growing much faster, but the market is asking: "Why can't you grow quickly while achieving positive free cash flow?"