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The $500 Billion Question: Can Google Cloud’s Massive AI Backlog Outrun Its Mind-Boggling CapEx Boom on Oct. 28?

Google Cloud's backlog just crossed $500 billion while free cash flow turned negative for the first time ever, and Wednesday's earnings report will reveal whether Alphabet's historic spending spree is pulling ahead of its own ability to pay for it.

By Rich Duprey
Published October 24, 2026, 11:39am ET · 3 min read

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A modern glass-paneled corporate building displays the colorful "Google" logo prominently on its facade. Green tree branches with fresh leaves partially hang into the frame from the top, while a bare tree stands in the lower right. The blue sky is visible above, and reflections of the environment are seen on the building's windows.
The iconic Google logo at Alphabet's headquarters signifies the company's robust position as an AI leader and its compelling blend of innovation and financial strength. © JHVEPhoto / iStock Editorial via Getty Images

Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction, NASDAQ:GOOG) reports third-quarter results after the close on Wednesday, October 28. Google Cloud’s backlog stands at $514 billion, and 2026 CapEx guidance runs $195 billion to $205 billion. This report shows which one is growing faster.

Record Cloud Growth Meets Negative Free Cash Flow

Last quarter, revenue rose 24.2% to $119.80 billion, ahead of the $116.91 billion consensus. Google Cloud led again. Revenue there rose 82% to $24.77 billion, speeding up from 63% in Q1 and 34% a year ago, while Cloud operating margin expanded to 35.6% from 20.7%.

Costs grew just as fast. CapEx rose 100% to $44.92 billion, free cash flow came in at negative $5.86 billion — the first time ever — and management raised its 2026 CapEx range from $180 billion to $190 billion. To pay for it, Alphabet raised about $70 billion in equity and debt and suspended buybacks.

Reported EPS of $9.11 included a $99.03 billion equity securities gain, yet shares fell 6.89% on the day of the report. GOOG closed Friday at $317.28, down 5.83% over the past week.

GOOGL earnings explorer

Consensus Calls for Nearly 25% Revenue Growth

Metric Consensus Prior-Year Actual YoY Growth
Q3 2026 Normalized EPS $3.0047 $2.87 4.69%
Q3 2026 Revenue $127.85B $102.35B 24.92%
FY2026 EPS $20.595 $10.81 90.52%
FY2026 Revenue $500.15B $402.84B 24.15%

The full-year EPS figure includes the first half’s equity gains, which makes the quarterly estimate the cleaner gauge of operating profit.

Backlog Conversion and Margins Will Set the Tone

My first focus will be the backlog. It rose by more than $50 billion sequentially last quarter, and management expects to recognize just over 50% of it within 24 months. Sundar Pichai said in July, “We are still in a supply-constrained environment.”

Margins come next. Alphabet planned to lean on third-party capacity in Q3 as a bridge, which management said would create “modest margin pressure,” on top of Wiz integration costs and rising depreciation. You should compare Cloud margin against 35.6% and consolidated operating margin against 34%.

On spending, any change to the 2026 range matters, as does early color on 2027, when management expects CapEx to “increase significantly.” TPU system sales add another variable. That revenue ramps as Alphabet leaves 2026, with the “vast majority” arriving in 2027.

All that CapEx has to be powered, cooled, and connected by somebody, which is the entire point of a free report we put together on seven AI infrastructure suppliers that aren’t the chipmakers: you can grab it here.

Search still has to fund the expansion. Revenue there grew 17% to $63.3 billion, and AI Mode passed 1 billion monthly users. A court has already rejected a forced breakup of Google’s ad-tech business, so any detail on the remaining behavioral remedies could also move opinion.

A $514 Billion Backlog Has to Turn Into Cash

Alphabet beat estimates in all 8 of its last reports. Even so, the stock’s moves on report day ranged from a 9.97% gain to a 6.89% drop, and the market now cares most about how efficiently that capital gets spent. If the backlog turns into revenue fast enough to steady free cash flow while CapEx keeps rising, the spending case gets easier to defend heading into a greater 2027.

Contact [email protected] for any questions or corrections.

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Rich Duprey

After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.

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