Alphabet Remains a Net-Cash-Rich, Free-Cash-Flow Generating Powerhouse

Image: Alphabet’s revenues eclipsed $100 billion in the quarter.

By Brian Nelson, CFA

On October 29, Alphabet (GOOG) (GOOGL) reported solid third quarter results with revenue and GAAP earnings per share coming in better than expected. Consolidated revenues increased 16% (up 15% in constant currency) in the quarter, to $102.3 billion. Consensus was at $100.14 billion. Google Search & other, YouTube ads, Google subscriptions, platforms and devices, and Google Cloud all experienced double-digit growth in the third quarter. Google Services revenue increased 14%, while Google Cloud revenues jumped 34%. Adjusted operating income increased 22% on an operating margin of 33.9%. Net income increased 33%, while earnings per share increased 35%, to $2.87, better than consensus of $2.26.

Management had the following to say about the results:

Alphabet had a terrific quarter, with double-digit growth across every major part of our business. We delivered our first-ever $100 billion quarter.

Our full stack approach to AI is delivering strong momentum and we’re shipping at speed, including the global rollout of AI Overviews and AI Mode in Search in record time. In addition to topping leaderboards, our first party models, like Gemini, now process 7 billion tokens per minute, via direct API use by our customers. The Gemini App now has over 650 million monthly active users. We continue to drive strong growth in new businesses. Google Cloud accelerated, ending the quarter with $155 billion in backlog. And we have over 300 million paid subscriptions led by Google One and YouTube Premium.

We are investing to meet customer demand and capitalize on the growing opportunities across the company.

In the quarter, Alphabet generated $48.41 billion in cash from operations and spent $23.95 billion in property and equipment, resulting in free cash flow of $24.46 billion. Year-to-date, cash from operations was $112.3 billion, while the company spent $63.6 billion in property and equipment, resulting in free cash flow of $48.7 billion. Total cash, cash equivalents, and marketable securities was $98.5 billion at the end of the quarter, versus $21.6 billion in long-term debt. The company pays a quarterly cash dividend of $0.21 per share. Looking to all of 2025, Alphabet expects capital expenditures in the range of $91-$93 billion. Even in the face of higher capital spending, Alphabet remains a net-cash-rich, free-cash-flow generating powerhouse. We continue to like shares in the Best Ideas Newsletter portfolio.

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