Alphabet's Quarterly Capex Passed Its Operating Cash Flow

Alphabet spent $51,355 million on property and equipment in the three months to 30 September 2026 and generated $42,290 million of cash from operations, according to the results it filed with the Securities and Exchange Commission on 28 October 2026. Capital spending exceeded operating cash flow by about $9 billion.

Revenue for the quarter was $127,577 million, up 25 per cent from $102,346 million a year earlier. Google Cloud more than doubled, to $30,709 million from $15,157 million, and its operating income rose to $11,121 million from $3,594 million. Alphabet said sales of its own TPU systems were "a meaningful contributor" to that growth.

How the gap was funded

Alphabet repurchased no stock in the quarter, against $11,504 million a year earlier. It raised $28,996 million from debt issuance, net of costs, and $12,371 million from issuing common stock through its at-the-market programme, selling 12 million Class A shares for $4.3 billion and 24 million Class C shares for $8.1 billion. The filing says $27.6 billion of that programme remained available on 30 September 2026.

Microsoft filed its own quarterly results the same day, covering the same three months. Its additions to property and equipment were $39,367 million against $19,394 million a year earlier, a similar rate of increase, but operating cash flow of $58,000 million covered that with room to spare. Microsoft also repurchased $4,379 million of stock and paid $6,757 million of dividends.

Operating income rose 30 per cent and net income fell

Income from operations was $40,576 million, up 30 per cent, for a margin of 31.8 per cent. Net income available to common stockholders was $26,170 million, down from $34,979 million, and diluted earnings per share were $2.12 against $2.87. The difference sits in one line. Other income and expense, net, swung to a loss of $8,221 million from a gain of $12,759 million, a figure driven by the marking of debt and equity holdings rather than by trading.

The buildout behind these numbers has been running into physical limits elsewhere. Parallax Nexus reported on 18 October that Microsoft had terminated its agreement at Nscale's data centre in Loughton, Essex, where the grid connection had slipped to the 2030s, and on ASML's statement of 14 October that its 2027 and 2028 supply will fall short of demand.

The inventory line

One balance sheet item moved further than any other in proportional terms. Alphabet's inventory stood at $13,308 million on 30 September 2026 against $2,439 million at the end of December 2025. Property and equipment, net of depreciation, reached $372,827 million from $246,597 million over the same nine months, and quarterly depreciation of property and equipment rose to $8,369 million from $5,611 million.

The honest reading is that Alphabet has moved from funding its expansion out of current earnings to funding it in the capital markets, and gave up the buyback to do it. The counterweight is liquidity: it held $265,098 million of cash, equivalents and marketable securities on 30 September 2026, so a quarter of capex above operating cash flow reflects a choice about where to put money rather than a shortage of it. The release carries no capital spending figure for 2027, which Alphabet was due to discuss on its earnings call at 1.30pm Pacific time on 28 October.