All my stock charts and data is from stockanalysis.com. Check out Alphabet’s historical metrics and earnings information here.

Revenues came in 25% higher YoY to $127.6 billion with operating income 32% YoY to $40.576 billion. There was a one-time hit of $8.221 billion from European charges that brought down their net income to $26.17 billion and their diluted EPS to $2.12.

Looking at the segment revenue on stockanalysis.com, their Google Search and Other segment came in at 12% or $63.35 billion which was lower QoQ. They attributed this to foreign exchange effects but they also said that search query growth was the highest in 5 years. Even so the monetization in AI mode is less and they may have to address that pain point at some point soon.

Investors will also need to determine whether the drop in search is meaningful AI disruption or not. This was the same talk when AI first came out as well, so it looks like those worries were just under the surface for investors.

The real star of the show was their cloud coming in at 103% growth to $30.709 billion. The growing TPU sales segment will be a big driver of the cloud going forward. Plus this shows that they are getting market share from rivals Microsoft Azure and Amazon AWS.

Net cash is still good at $123 billion but debts are increasing rapidly which is

another source of concern. As management states in their investor letter, they issued shares and unsecured notes to continue funding their AI ambitions.

Management has guided for significantly higher capex in 2027 compared to 2026 so there will be no mitigation in capex for now. However, their backlog in immense sitting at $561 billion for the next 2 years. expects to recognize more than 55% of the $561 billion backlog (roughly $310 billion) as revenue over the next 24 months.

So the demand is there for them to continue spending to get that ROIC, but investors are getting nervous as spend keeps creeping up. One thing I noted this morning on Substack is that capex is not going to be the same 1 year from now.

Buying power is getting eroded through inflation, so the CFOs of these mega cap tech companies might be realizing that they must take the pain now in order to realize a massive bonus when that same buying power won’t compound as much.

This does lead to declining free cash flow as seen above. They reported -$9.07 billion in FCF because of that one-time European charge which was much more than anticipated by investors and analysts.

However, their operating CF is increasing on an annual basis, so they are getting ROIC on their capex. The question is whether it is enough or greater than their spend.

As always, my content is not financial advice, so please do your own due diligence when it comes to investing your own money.

is dropping like a rock thrown into a lake. The reason is the news coming out of their recent earnings report. Let’s take a look at the numbers in this quick look at .

Revenues came in at $64.6 billion for Q3’26 and the breakdown is shown by geography below. Most of that money, approximately $63 billion of it, was generated from the advertising side of things.

The expenses showed a huge percentage increase in the G&A costs but all the other segments seemed to be inline. Net income came in at $9.86 billion, diluted EPS at $3.83 and free cash flow at -$2.12 billion. Importantly, due to ongoing litigation settlements, their income from operations would have been $22.88 billion instead of the $12.99 billion and their diluted EPS would have been $7.40.

This shows the impact that the settlements are having on the bottomline at a time when really can’t be spending on yet another expense. As a result free cash flow is now negative which is insane for a company that used to be so asset-light and a cash cow.

In addition, they raised the low end of their AI spend for 2026 from $130-$145 billion to $135-$145 billion which is inline with the continual raising of capital expenditures by all AI tech names.

Probably one of the most concerning things coming out of the earnings call is the establishment of a new class C of shares similar to how is structured. These are non-voting shares that do not affect Mark Zuckerberg’s voting shares.

According to their own investor letter:

Creating a New Class of Shares for Capital Raising, Employee Compensation, Potential Acquisitions, and Other General Corporate Purposes – The scale of investment required to compete, sustain growth, expand infrastructure, and pursue new strategic initiatives amidst the AI transformation taking place in the industry is significant. The Special Committee determined this new class of common stock will provide Meta the ability to finance its growth and help the company remain a leader among fierce competition both domestic and international.

So this is more dilution for shareholders just by a different name. Instead of taking on direct debt, they will be issuing shares to fund more AI spending.

This, plus the weakness in AI names, is probably why is tanking as of the time of this writing. Like I mentioned in my note, I sold out of before this earnings call, but I would revisit this name if it fell much more.

As always, my content is not financial advice and you should do your own due diligence when investing your own money.

The stock is down however, as even these amazing numbers were not enough to move the needle for investors. More and more, i…

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Looking at the overview of , you can see that the stock is down roughly 20% for the y…

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has been shipping their AI products with accelerated speed taking control of the narrativ…

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Now, did report zero AI capex spend or something drastically different than other mega cap tech names? Not at all. But the difference is how they have locked in massive future revenues through customer commitments, have a high-growth cloud business to absorb AI capex, and the ability to deliver actual revenue from that capex through advertising and selling that compute to customers.

Let’s first look at their earnings results from this past quarter. I have shared quick earnings results on my social platforms (definitely follow my social accounts to get the latest information very quickly), but here they are once more so we can have them as a reference.

For this analysis, I used an un-levered beta of 1.55 (software internet industry) which was re-levered to 1.37 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 17.61%, and a risk free rate of 3.76%.

Please refer to Stock Analysis for all the data I used in this analysis.

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For this analysis, I used an un-levered beta of 1.23 (internet application and software industry) which was re-levered to 1.18 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 14.5% based on CFO commentary, and a risk free rate of 3.76%.

Please refer to Stock Analysis for all the data I used in this analysis.

I used the long dated bond rate for which is 4.875% for the pre-tax cost of debt as of the writing of this analysis. Now with those parameters out of the way, here is the company guidance.

They are guiding for a second quarter revenue of $59.5 billion (midpoint) which is only slightly above analyst expectations and largely inline. Total expenses remain unchanged which is telling because that indicates that the increase in capex is largely due to component pricing increases rather than spending more to acquire more compute.

Even so, $125-$145 billion is a large amount of capex for internal use AI that is not directly sold to customers and consumers. For that reason, the stock is getting hammered post earnings. In addition, looking at the DAP (daily active people) metric, which is arguably the most important metric for as they require people to view and click on ads which fund their advertising business, it’s clear that there were extenuating circumstances.

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For this analysis, I used an un-levered beta of 1.23 (internet application and software industry) which was re-levered to 1.16 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 26.15%, and a risk free rate of 3.76%.

Since the interest expenses are not available for on Stock Analysis, I used the 2030 bond rate for which is 4.73% as of the writing of this analysis. Now with those parameters out of the way, here is the company guidance.

As you can see for their FY 26 guidance, management describes full year guidance for subscription revenues only not the professional/other revenues. Based on this, I used a 22.25% revenue growth rate for both subscription and other revenues as an approximation for Year 1.

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For this analysis, I used an un-levered beta of 0.77 (consumer services industry) which was re-levered to 0.85 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 6.00%, and a risk free rate of 3.76%.

Since the interest expenses are not available for on Stock Analysis and does not have 10 year bond rates, I searched for analyst’s estimates for the pre-tax cost of debt which is ~7.2% as of now. Now with those parameters out of the way, here is some information from the company’s investor presentations and earnings.

For their 2026 guidance, management describes several ranges for key metrics and I use the midpoint of those just like the other analysis I have done. Based on this, I used a 16.5% revenue growth rate and a 10.08% operating margin for Year 1.

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Since the interest expenses are not available for on Stock Analysis, I used the 10-year (2036) Salesforce bond maturity rate for the pre-tax cost of debt which is 5.55%. Now with those parameters out of the way, here is some information from the company’s investor presentations and earnings around FY 27 guidance.

In their FY ‘27 (2026) guidance, management describes several ranges for key metrics and I use the midpoint of those just like the other analysis I have done. Based on this, I used a 10.5% revenue growth rate and a 20.9% operating margin for Year 1.

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management put out guidance for Year 1 financials (2026), in their February update for Q4 2025 and full year 2025 results presentation.

In this 2026 guidance, they offer ranges of values for several key metrics of which I use the midpoint in the subsequent calculations. Using these numbers, I derive a revenue of ~$1.69 billion, operating margin of ~2.37%, and capex (sustaining and project capex) of ~$172.5 million.

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I used an un-levered beta of 1.23 based on Aswath Damodaran’s work for a software application/service company industry. This beta was re-levered to 1.18 using the Hamadi equation.

Effective tax rates, pre-tax cost of debt and base year drivers were all calculated using TTM or most current data pulled from stockanalysis.com.

The ERP or equity risk premium was 4.5 for equities centered in the US. Base year revenue growth was calculated with the TTM financials and came in at 10.96% growth. Let’s look at how I structured stage 1 of the DCF projection:

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A un-levered beta of 1.35 was used based on Aswath Damodaran’s work for semiconductor equipment providers. This beta was re-levered to 1.23 using the Hamadi equation. Effective tax rates, pre-tax cost of debt and base year drivers were all calculated using TTM or most current data.

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