EARNINGS REVIEW
Alphabet, 2026 Q1 Earnings Results
Historical quarterly report · Results and outlook reflect information available at the time of that release. Actual results from later quarters have not been incorporated into the outlook.
Search and Cloud both grew, and Cloud operating income expanded. Investment valuation gains contributed substantially to the sharp rise in net income; cash investment increased, but quarterly FCF remained positive.
Assessment · Cloud growth and margin improvement are positive. However, remove the valuation-gain effect from net income and assess whether operating income and cash generation can both grow while absorbing the increased investment plan.
Key management and company statements
Earnings release · Excerpt from the original“Google Cloud revenues grew 63%”Meaning · Google Cloud revenue grew 63%.
Context · Growth was driven by demand for enterprise AI solutions and infrastructure, and core GCP services. This is distinct from total Alphabet revenue growth.
Original statement ↗01 Revenue, operating income and results versus expectations
Year over year · revenue 90.234 → 109.896 B$ (+21.8% · +19.662 B$), operating income 30.606 → 39.696 B$ (+29.7% · +9.090 B$).
Quarter over quarter · revenue 113.828 → 109.896 B$ (−3.5% · −3.932 B$), operating income 35.934 → 39.696 B$ (+10.5% · +3.762 B$), operating margin 31.6% → 36.1% (+4.6%p).
Cloud revenue increased by 7.768 B$, while operating income rose from 2.177 → 6.598 B$, an increase of 4.421 B$. Cloud operating margin rose from 17.8% → 32.9%. Within Services, Search revenue increased from 50.702 → 60.399 B$, and YouTube advertising from 8.927 → 9.883 B$. Currency-hedging adjustments reconcile segment totals to consolidated revenue.
02 Earnings sustainability · From operating income to net income
Net non-operating income of 37.716 B$ arose mainly from unrealized valuation gains on private equity holdings. Attributing the entire increase in consolidated net income of 62.578 B$ to Search and Cloud operating performance would overstate earnings power.
Alongside Cloud earnings growth, the Other Bets operating loss widened from 1.226 → 2.100 B$. Losses from Alphabet corporate activities, including company-wide AI research and development, also increased from 3.027 → 5.391 B$.
- Operating income
- 39.696 B$
- Net non-operating income
- 37.716 B$
- Income tax expense
- −14.834 B$
- Consolidated net income
- 62.578 B$
Net income of 62.578 B$ in the existing quarterly dataset is on a consolidated basis.
03 Cash flow quality · Net income → OCF → FCF
FCF was 10.116 B$, calculated by subtracting cash PP&E investment of 35.674 B$ from OCF of 45.790 B$. Investment valuation gains help explain the large gap between net income and OCF and are distinct from revenue received in cash.
Business acquisitions and equity investments are not included in this FCF formula. Positive FCF therefore does not mean all investment-related cash outflows for the quarter were covered.
- Consolidated net income
- 62.578 B$
- Total net adjustments for noncash items, working capital and other items¹
- −16.788 B$
- Operating cash flow
- 45.790 B$
- Cash CapEx
- −35.674 B$
- FCF
- 10.116 B$
¹ Total net adjustments calculated as OCF−net income. This is not a single disclosed line item; it combines noncash items, working capital, classification differences and other adjustments.
FCF versus previous quarter · 24.551 → 10.116 B$, 14.435 B$ deterioration.
04 Financial capacity · Net debt and payment obligations
Previous-quarter net cash · 2025-12-31
Cash and current investments 126.843 / Debt 48.543 B$
Current-quarter net cash · 2026-03-31
Cash and current investments 126.840 / Debt 79.499 B$
Net debt worsened by 30.959 B$ from the previous quarter. The carrying amount of current debt is 1.998 B$. It may differ from the principal maturity schedule.
Net proceeds from senior unsecured note issuance during the quarter were approximately 31.1 B$. Cash equivalents and debt can increase together, so total cash alone does not establish financial capacity.
Of total revenue backlog of 467.6 B$, Google Cloud accounts for 462.3 B$. Starting this quarter, approximately 7.3 B$ of contracts with terms of 1 year or less are included, changing the definition from previous quarters. Comparisons without YoY or QoQ figures on the same definition are therefore omitted below.
Common definition · Cash and current investments = cash equivalents + current investments and deposits. Debt = carrying amount of interest-bearing borrowings (current + noncurrent), excluding separately reported lease liabilities. This differs from total liabilities of 225.173 B$. Restricted cash, noncurrent securities and noncurrent deposits are excluded from cash and current investments.
05 Investment, capital allocation and cash returns
At the time, the CFO raised 2026 CapEx guidance from 175~185 B$ to 180~190 B$, reflecting investment related to the Intersect acquisition. Capacity expansion increases supply capabilities while also raising future depreciation and data-center operating costs.
This quarter, cash CapEx/revenue is 32.5% and FCF/revenue is 9.2%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.
06 Next-quarter and full-year outlook: implications
The company described business-level growth and investment direction rather than a numerical next-quarter revenue range. Follow-up indicators are conversion of Cloud contracts into revenue, AI monetization in Search, and maintenance of operating margin and FCF after investment expands.
RPO / Backlog
Alphabet revenue backlog, mainly Google Cloud and distinct from the explicitly stated Cloud amount. Inclusion of contracts with terms of 1 year or less from 2026 creates a break in the time series · Contract balances are not equivalent to confirmed next-quarter revenue or cash inflows. RPO scope differs across companies.
RPO disclosure ↗Quarterly results · CY-aligned presentation
Amounts in B$. Based on the CY-aligned year of this report, the table shows all 4 quarters of the preceding year and the current year to date. Each fiscal quarter is assigned to the CY quarter with the greatest overlap in actual reporting dates, alongside its original FY/CY quarter and start/end dates. Amounts have not been recalculated into actual calendar quarters.
| CY alignment | 2025 · 4 quarters | 2026 · 1 quarters | Change this quarter | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Metric | 2025 total4-quarter totalBalances are period-end | 1Q2025 Q125-01-01 ~25-03-31 | 2Q2025 Q225-04-01 ~25-06-30 | 3Q2025 Q325-07-01 ~25-09-30 | 4Q2025 Q425-10-01 ~25-12-31 | 2026 year to date1-quarter totalBalances are period-end | 1Q2026 Q126-01-01 ~26-03-31 | QoQvs 2025 Q4 | YoYvs 2025 Q1 |
| Revenue | 402.836 | 90.234 | 96.428 | 102.346 | 113.828 | 109.896 | 109.896 | −3.5%−3.932 B$ | +21.8%+19.662 B$ |
| Operating income | 129.039 | 30.606 | 31.271 | 31.228 | 35.934 | 39.696 | 39.696 | +10.5%+3.762 B$ | +29.7%+9.090 B$ |
| Operating margin | 32.0% | 33.9% | 32.4% | 30.5% | 31.6% | 36.1% | 36.1% | +4.6%p | +2.2%p |
| FCF | 73.266 | 18.953 | 5.301 | 24.461 | 24.551 | 10.116 | 10.116 | −14.435 B$ | −8.837 B$ |
| Operating cash flow | 164.713 | 36.150 | 27.747 | 48.414 | 52.402 | 45.790 | 45.790 | −12.6%−6.612 B$ | +26.7%+9.640 B$ |
| Cash CapEx | 91.447 | 17.197 | 22.446 | 23.953 | 27.851 | 35.674 | 35.674 | +28.1%+7.823 B$ | +107.4%+18.477 B$ |
| Net cash | 78.300 | 80.942 | 67.541 | 71.894 | 78.300 | 47.341 | 47.341 | −30.959 B$ | −33.601 B$ |
| Cash and current investments | 126.843 | 95.328 | 95.148 | 98.496 | 126.843 | 126.840 | 126.840 | −0.0%−0.003 B$ | +33.1%+31.512 B$ |
| Debt | 48.543 | 14.386 | 27.607 | 26.602 | 48.543 | 79.499 | 79.499 | +63.8%+30.956 B$ | +452.6%+65.113 B$ |
Indented rows are components or reference items for the parent metric. Net cash = cash and current investments − debt. Depending on the company definition, FCF may include additional adjustments such as lease principal and therefore differ from operating cash flow − cash CapEx. See the cash flow discussion for the detailed definition.
Annual totals and year-to-date totals appear before each year’s quarters. Revenue, earnings and cash flow are sums of quarterly figures; margin is total operating income ÷ total revenue; net cash, cash and debt are balances at the end of the last quarter. Do not treat totals covering different lengths of time as directly comparable annual figures.
Net cash = cash and current investments − debt. A negative figure indicates net debt. Changes in FCF and net cash are shown as absolute amounts in B$. Quarterly figures have not been adjusted to force reconciliation with disclosed annual totals.
Comparison bases, calculation methods and quarterly sources
Calculation and presentation · Amounts in B$. Figures disclosed in millions of US dollars are divided by 1,000 without altering the source values. Where only cumulative cash flows are available, the previous cumulative period within the same fiscal year is deducted. YoY, QoQ and margins are calculated using amounts before display rounding. Earnings changes from negative or 0 bases are expressed as profit/loss transitions and absolute amounts.
Opinions and outlook · Management quotations include original excerpts and their translations. Quotations not identified as earnings-call transcripts come from earnings releases. Interpretations and implications are the author’s judgments. No numerical probability of achieving a target is assigned without quantitative verification.