Alex Sirois
4 min read
Quick Read
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Capex exceeded operating cash at both META and GOOGL, driving free cash flow to -$2.12B and -$9.06B and forcing both to raise outside capital.
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Google Cloud operating income surged from $3.59B to $11.12B, with Sundar Pichai citing “strong demand” for TPU systems across a wide range of customers.
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Meta deferred all 2027 spending guidance to the Q4 call, leaving investors waiting to learn whether Muse delivers its promised 10x cost-efficiency gain.
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Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOGL) both missed Q3 GAAP EPS estimates because of one-time charges. Their ad businesses still grew. Investors focused on capex instead, because spending drove both into negative free cash flow. Both are also raising outside money, and that leaves them more exposed than other hyperscalers heading into Q4.
Ad Pricing Lifts Meta While Cloud Lifts Alphabet
Meta’s revenue rose 26.1% to $64.60 billion. Average price per ad climbed 14%, which suggests AI recommendations are making each ad slot worth more. Without a $9.89 billion legal charge, EPS would have been $7.40. Mark Zuckerberg insisted “the core business is strong.”
Alphabet’s standout was Google Cloud. Revenue there rose 103% and operating income reached $11.12 billion, up from $3.59 billion, so AI demand is already showing up as profit. Sundar Pichai pointed to “strong demand for our TPU systems across a wide range of customers.”
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Outside Funding Puts Both Under a Brighter Spotlight
Alphabet’s capex rose 114.4% and Meta’s rose 85.4%. At both companies, spending exceeded operating cash. Alphabet issued $28.7 billion in notes and also sold shares through an at-the-market program. Meta plans a nonvoting share class that can be used for capital raising, and CNBC reported a large stock offering to fund AI expansion (CNBC). Raising money this way brings dilution and higher interest costs, and both will come up on Q4 calls. The flip side is that every dollar of this capex lands with the power, cooling, and networking suppliers behind the data centers, which we profiled in a free report on seven AI infrastructure names here.
