Alphabet Sales Jumped 25%, but the Stock Fell After Hours
Alphabet, the company behind Google, reported third-quarter 2026 revenue of $127.6 billion, up 25% from a year earlier, in its results release dated October 28. Its shares fell about 9% in after-hours trading that day, according to Wall Street Journal live coverage. The Journal said the drop could be the stock's worst one-day decline in years.
Revenue is the total money a company takes in from selling its products and services, before any costs are paid.
The timing was set in advance. On October 6, Alphabet announced that it would discuss the results on Wednesday, October 28, at 1:30 p.m. Pacific Time, which is 4:30 p.m. Eastern. The results came out during the regular trading day. The share drop came after the market closed, so the 9% figure is not an official closing price.
Revenue is split into two main parts. Google Services revenue rose 11% to $96.3 billion in the same release. Services makes up roughly three quarters of the total. The rest, about $31.3 billion, is what remains when you subtract Services from the total. Since the total grew 25% while Services grew 11%, the other part must have grown much faster. The exact growth rate for that part should come from the company's full breakdown, not from my subtraction.
Costs grew at about the same pace as revenue. Cost of revenues, the direct costs of providing what the company sells, rose 24% to $51.4 billion, according to Investing.com. Total costs and expenses rose 22% to $87.0 billion. Using those rounded percentages, last year's cost of revenues was about $41.5 billion. That puts gross margin, the share of each sales dollar left after direct costs, near 60% in both years. The gap between $127.6 billion in revenue and $87.0 billion in total costs is $40.6 billion.
Cloud is the part of the business that sells computing services to other companies. Its most recent unit-level figure is from the first quarter. Operating income, which is profit from the main business, tripled to $6.6 billion in the first quarter of 2026, up from $2.2 billion a year earlier, per Reuters. That number is the yardstick for judging the third-quarter cloud figures. Reuters also reported that Amazon, Microsoft and Alphabet were expected to show faster cloud growth in the week of October 27, so Alphabet's result will be compared with those rivals too.
Why does a 9% drop matter to someone who does not own Alphabet stock? Alphabet is one of the largest companies in the major stock indexes. An index is a basket of stocks that tracks a broad part of the market. Index funds and many retirement accounts hold those baskets, so a big move in one company can reach people who never read its reports. After-hours trading also has fewer buyers and sellers than the regular session, so prices can swing more and can reverse once analysts and the company's call are digested.
In my view, the most useful question for the next few trading days is whether costs keep growing at about the same pace as revenue, and whether the non-Services parts keep outpacing Services. The 25% headline is strong. But the share price reflects expectations about whether that gap can last, not just one quarter. The official closing price, the management commentary on the call and the full segment numbers should give a clearer picture. Until then, the 9% is only an after-hours reading.
