In the third quarter of 2026 Google reported total revenue of roughly $128 billion and net income exceeding $26 billion. Despite a 25 percent year-over-year increase in revenue, net income fell by about $9 billion compared with the prior year. The company posted a negative cash flow of $9.06 billion, and its share price slipped close to 12 percent after the results were released. Analysts had forecast earnings per share of $3.02, but Google posted $2.12.
Google’s cloud division generated just over $30 billion in revenue, surpassing analyst estimates by roughly $1 billion. The strong performance helped offset some of the pressure from the AI-related cash burn, which the company attributes to capital expenditures of $51.4 billion in the quarter. Google said its total spending for 2026 is expected to fall between $195 billion and $205 billion, and it has set a target of more than $300 billion for 2027.
The firm continues to transition its search product toward an AI-driven platform built on Gemini models. Chief Business Officer Philipp Schindler reported that search queries grew 12 percent year over year in the quarter, a slowdown from the 17 percent increase recorded in the prior quarter and the 19 percent rise in the first quarter of 2025. Correspondingly, revenue from traditional web search remained flat during the same period, highlighting the challenge of monetizing the newer AI mode.
According to Schindler, each query processed in AI mode yields less revenue than a comparable traditional search because it serves fewer advertisements and the ads cost less to deliver. He cautioned that advertisers may need additional time to appreciate the value of AI-search placements, noting internal research indicating that users find these ads more relevant than those shown in conventional search results. The company therefore expects AI-mode revenue to grow as the market adapts.
Google announced that contextual advertising will be rolled out more broadly within AI mode, starting with additional international markets and expanding the multi-turn ad format already in use in the United States. In the multi-turn approach, sponsored links can change dynamically as a user continues a conversational exchange with the chatbot. CEO Sundar Pichai said these more complex interactions are becoming increasingly common as the company nudges users toward the AI-driven experience.
The persistent negative cash flow reflects Google’s aggressive investment in AI, with capital outlays projected to rise sharply in the coming years. While cloud services currently provide a growing revenue stream that supports the AI infrastructure, the business model relies heavily on continued funding for AI startups that rent compute capacity. If venture capital for those firms wanes, or if search growth stalls further, the company could see larger deficits despite its overall profitability.