# GOOGL Quarter forecast · Q4 2026

> Alphabet reports Q4 2026 in February 2027. Date not yet set. Our numbers below have a cutoff of 29 October 2026, 05:39 ET and do not change.

Canonical: https://pricedin.markets/googl/fq4-2026/preview/

cutoff 29 October 2026, 05:39 ET

Alphabet reports Q4 2026 in February 2027. Date not yet set. Our numbers below have a cutoff of 29 October 2026, 05:39 ET and do not change.

GOOGL · earnings preview · our forecast as of 2026-10-29 05:39:46 ET · 6 AI forecasters · 80% ranges, 1 in 10 to 9 in 10

## GOOGL reports Q4 2026

The report date is not in the calendar yet.

Next report · Q4 2026 $143B +25% on Q4 2025 adjusted EPS $3.01

Quarter after · Q1 2027 $141B +29% on Q1 2026 adjusted EPS $2.94

### Q4 2026 · the quarter GOOGL reports

Fourth quarter 2026: the models expect Q4-2026 sales middle, average: $143B, as chip-system sales in Cloud offset a slower Search quarter.

Sales **$143B** +25% on Q4 2025 ($114B)

*50% range* $139B – $146B *80% range* $136B – $150B

Adjusted EPS **$3.01** +13% on Q4 2025 ($2.67: $2.82 reported, less $0.15 for gain (loss) on equity securities, net, in the Q4 2025 release)

*50% range* $2.82 – $3.19 *80% range* $2.63 – $3.40

#### Investment and cash generation

Base case

Capital spending **$68.0B**

Free cash flow **−$12.4B**

Free cash flow: operating cash flow less capital spending.

- **Q4-2026 base capital spending, average: $68.0B buys servers, networking gear and data centers that add Cloud capacity mostly for 2027. Q4-2026 base cash operating_cash_flow, average: $55.7B falls short because chip inventory is built before deliveries, so Q4-2026 base free cash flow, average: −$12.4B, on the company's basis: operating cash flow less capital spending. *3 of 6***
  - **Opus 5.5** Capital spending for 2026 is about $200 billion, which means about $68 billion in the fourth quarter after $132 billion in the first nine months.
  - **DeepSeek V4.1 Flash** working capital and other items absorb about $6,000 million of that, mainly inventory and receivables
  - **Kimi K3.1 Pro** the hardware model also means inventory cash outflows and a different margin mix

Alphabet's third quarter matched the models on sales but not on profit. Q3-2026 sales, reported: $128B Q3-2026 operating margin, reported: +32% Cloud carried the growth, Cloud revenues were up 103% to $30.7 billion, helped by the first meaningful sales of Google's own AI chip systems to customers, while hardware costs and depreciation weighed on margins.

For the fourth quarter the company flagged three things: Search growth will feel pressure as it laps last year's acceleration, chip-system sales will keep scaling, and newly rented computing capacity will dent Cloud margins. Currency should be a slightly bigger drag than in the third quarter.

The models land close together. Their middle implies Q4-2026 sales middle growth on Q4-2025, average: +25%, with the range running from Q4-2026 sales low, average: $136B to Q4-2026 sales high, average: $150B. They expect Q4-2026 base operating margin, average: +32%, roughly the third quarter's level, as Cloud scale offsets rented capacity and lower-margin hardware.

On earnings per share, which here leave out swings in the value of the company's stock holdings, they expect Q4-2026 adjusted EPS middle, average: $3.01, or Q4-2026 adjusted EPS middle growth on Q4-2025, average: +13%. New share sales, which replaced buybacks this year, and the dividend on new preferred stock trim the per-share figure.

They differ mainly on Cloud's size and margin. DeepSeek puts Cloud lowest, Sol and GLM highest. Gemini expects the best margin and so the highest earnings; Sol cuts the margin most.

Earnings per share here exclude gains and losses on equity securities. They build from an operating margin near the third quarter's, a tax rate a little below earlier quarters, the preferred dividend, and a share count rising with new stock sales.

#### Sales by quarter

Q2 2025 $96B +14%

Q3 2025 $102B +16%

Q4 2025 $114B +18%

Q1 2026 $110B +22%

Q2 2026 $120B +24%

Q3 2026 $128B +25%

Q4 2026 $143B +25%

Each percent is on the same quarter a year earlier. The last row is the models' forecast.

#### The quarter forecast, line by line

| Line | Q3 2026 reported | Q4 2025 reported | Q4 2026 forecast | Q1 2026 reported | Q1 2027 forecast |
| --- | --- | --- | --- | --- | --- |
| Revenues | $128B | $114B | $143B | $110B | $141B |
| Cost of revenues | $51.4B | $45.8B | $58.8B | $41.3B | $58.1B |
| Research and development | $20.6B | $18.6B | $22.7B | $17.0B | $23.6B |
| Sales and marketing | $8.80B | $8.21B | $9.85B | $7.61B | $9.15B |
| General and administrative | $6.14B | $5.34B | $5.98B | $4.29B | $5.76B |
| Total costs and expenses | $87.0B | $77.9B | $97.3B | $70.2B | $96.6B |
| Income from operations | $40.6B | $35.9B | $45.2B | $39.7B | $44.6B |
| Operating margin | 31.8% | 31.6% | 31.7% | 36.1% | 31.6% |
| Other income (expense), net | −$8.2B | $3.2B | $0.5B | $37.7B | $0.7B |
| Income before income taxes | $32.4B | $39.1B | $45.7B | $77.4B | $45.3B |
| Provision for income taxes | $5.9B | $4.7B | $8.3B | $14.8B | $8.4B |
| Tax rate | 18.2% | 11.9% | 18.1% | 19.2% | 18.5% |
| Net income | $26.5B | $34.5B | $37.5B | $62.6B | $36.9B |
| Net income available to common stockholders | $26.2B | — | $37.2B | — | $36.6B |
| Number of shares used in diluted net income per common share calculation | — | 12.23B | 12.43B | 12.24B | 12.49B |
| Adjusted EPS | — | $2.67 | $3.01 | $2.76 | $2.94 |

Q4 2025 adjusted EPS $2.67: $2.82 reported, less $0.15 for gain (loss) on equity securities, net, in the Q4 2025 release.

Q1 2026 adjusted EPS $2.76: $5.11 reported, less $2.35 for gain (loss) on equity securities, net, in the Q1 2026 release.

The lines as the company's statement shows them. The forecast columns are the average of the models, line by line. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter worked out from the averaged lines with the company's adjustments.

#### What it rests on

**Tougher Search comparison**

The company says lapping last year's Search acceleration will pressure fourth-quarter revenue growth. “In Google services, we will continue to lap the search performance acceleration that began in the third quarter last year, which will pressure revenue growth in Q4.” Third-quarter 2026 earnings call

**Chip-system sales keep scaling**

Sales of Google's own chip systems scale further in the fourth quarter, then ramp meaningfully in 2027. “In Google Cloud, we expect TPU system sales to continue to scale in Q4, followed by a meaningful revenue ramp in 2027.” Third-quarter 2026 earnings call

**Rented compute dents margins**

Third-party computing capacity ramps in the fourth quarter, bringing near-term Cloud margin headwinds. “We expect margin headwinds in the near term as we utilize this capacity.” Third-quarter 2026 earnings call

**Cloud more than doubled**

Cloud revenue more than doubled from a year earlier, with chip-system sales a meaningful contributor. “Cloud revenues were up 103% to $30.7 billion, driven by strong growth in GCP with strength in AI, including both AI infrastructure and AI solutions, and core GCP. TPU system sales were also a meaningful contributor.” Third-quarter 2026 earnings call

**Slightly bigger currency drag**

At current exchange rates the company expects a slightly larger currency headwind than in the third quarter. “at current spot rates, we would expect a slightly larger FX headwinds to our consolidated revenues in Q4 relative to the prior quarter.” Third-quarter 2026 earnings call

#### The six models

Sales forecasts sit close; earnings differ more. Q4-2026 sales middle, lowest model: $141B is DeepSeek's, keeping Cloud's step smallest as “the bulk of the system revenue lands in 2027”. Q4-2026 sales middle, highest model: $144B is Kimi's, expecting “cloud and Tensor Processing Unit system sales drive another strong fourth quarter”. Gemini's earnings are highest, as “internal engineering efficiency offset a steep rise in server and data center depreciation”; Sol's lowest, as “Bridging capacity, hardware mix and shared research costs” cut its margin.

**Middle** the forecast **50% range** 1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside. **80% range** 1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.

PricedIn **$143B** $136B – $150B

$135B $140B $145B $150B

##### adjusted EPS

PricedIn **$3.01** $2.63 – $3.40

$2.60 $2.80 $3.00 $3.20 $3.40

#### Low and high

Base the middle forecast

Key assumptions

- ****Cloud grows strongly as chip-system sales scale and the backlog converts.** The company expects chip-system sales to keep scaling this quarter, and Cloud's backlog reached a record. *2 of 6***
  - **Opus 5.5** Cloud backlog conversion and TPU system sales
  - **DeepSeek V4.1 Flash** Cloud revenue led by TPU systems and GCP, roughly doubling year over year through 2026 and then slowing as the base grows
- ****Search and the wider Services business grow more slowly than in the third quarter.** The company flagged lapping last year's acceleration and a slightly larger currency drag. *2 of 6***
  - **Opus 5.5** Services growth near 10%
  - **DeepSeek V4.1 Flash** Advertising growth easing to high single digits as the 2025 search acceleration laps and the dollar strengthens
- ****Operating margin holds near the third quarter's as rented compute offsets Cloud's scale.** The company warned of near-term Cloud margin headwinds from third-party capacity. *2 of 6***
  - **Opus 5.5** I hold the fourth-quarter Cloud margin near 34%, against 36% in the third quarter, because the company is now renting third-party compute and TPU hardware sales carry a lower margin.
  - **GLM 5.3** Rising depreciation, energy and third-party compute costs compressing operating margin toward the low 30s
- ****No equity-security gains or losses are forecast, and the share count rises.** Such swings cannot be forecast; the company sold new shares instead of buying back stock. *1 of 6***
  - **Opus 5.5** Share issuance has replaced buybacks, so diluted shares rise from 12,368 million to about 12,425 million in the fourth quarter
  - **Opus 5.5** I forecast no mark-to-market gain or loss in future quarters, so my reported and adjusted figures are the same.

If all of this happens

**$143B** sales

**$3.01** adjusted EPS

**$68.0B** Capital spending

**−$12.4B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $55.7B |
| --- | --- |
| Less capital spending | −$68.0B |
| Free cash flow | −$12.4B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $37.3B |
| --- | --- |
| Depreciation of property and equipment | $9.50B |
| Stock-based compensation expense | $8.80B |
| Deferred income taxes | $2.00B |
| TPU inventory build, receivables and other assets | −$7.59B |
| Operating cash flow | $50.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$18.0B |

**Net income**

The quarter plan's net income, matching earnings of $2.98 a share; no equity-securities gain.

**Depreciation of property and equipment**

Up from $8.4 billion in the third quarter.

**Stock-based compensation expense**

Near the third-quarter level.

**Deferred income taxes**

Continued deferral of research cost deductions.

**TPU inventory build, receivables and other assets**

Continued TPU inventory build and receivables growing with sales.

##### Capital spending — model forecast

The guidance midpoint of $200 billion, less $132 billion spent in nine months, leaves $68 billion. 5% is unallocated for non-technical spending the company does not split out.

| servers and networking equipment | $42.0B |
| --- | --- |
| data centers | $22.6B |
| Unallocated capital spending | $3.40B |
| Total capital spending | $68.0B |

**servers and networking equipment** My assumption: 65% of the 95% of spending that is technical infrastructure.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** My assumption: 35% of technical infrastructure.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

**GPT-6.1 Sol**

| Net income before preferred dividends | $36.5B |
| --- | --- |
| Depreciation | $10.0B |
| Stock-based compensation | $9.50B |
| Deferred income taxes | $4.00B |
| Accounts receivable | −$6.50B |
| Inventory | −$5.00B |
| Accounts payable | $1.00B |
| Accrued expenses and other liabilities | $5.00B |
| Deferred revenue | $1.50B |
| Other operating assets | −$1.00B |
| Operating cash flow | $55.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$13.1B |

**Net income before preferred dividends**

Matches the quarter income plan; zero assumed equity-security gains and losses.

**Depreciation**

Forecast increase as the expanding installed asset base enters service.

**Stock-based compensation**

Forecast continued technical awards and hiring.

**Deferred income taxes**

Cash tax depreciation precedes book expense.

**Accounts receivable**

Seasonal revenue growth outpaces collections.

**Inventory**

Procurement for the 2027 system-sales ramp precedes shipments.

**Accounts payable**

Supplier terms fund part of operating procurement.

**Accrued expenses and other liabilities**

Seasonal year-end compensation and other operating accruals.

**Deferred revenue**

Some Cloud billings arrive before recognition.

**Other operating assets**

Prepaid service and operating deposits increase modestly.

##### Capital spending — model forecast

The $68 billion remaining-quarter spend takes annual purchases to $200 billion, the midpoint of the company's stated annual range. Categories are my estimates, not a disclosed forecast split. About $3 billion cannot responsibly be divided among other property and business uses. Inventory cash is in operating cash flow, not capital spending.

| servers and networking equipment | $42.0B |
| --- | --- |
| data centers | $23.0B |
| Unallocated capital spending | $3.05B |
| Total capital spending | $68.0B |

**servers and networking equipment** My forecast allocation, broadly informed by the latest technical-infrastructure mix.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My construction and commissioning cash-payment forecast, not management's quarterly allocation.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $36.5B |
| --- | --- |
| Depreciation of property and equipment | $9.50B |
| Stock-based compensation expense | $9.00B |
| Deferred income taxes | $1.50B |
| Assumed net loss on equity securities | $1.50B |
| Accounts receivable | −$5.50B |
| Inventory build for TPU system sales and devices | −$4.00B |
| Payables, accrued liabilities, deferred revenue, other assets and income taxes | $6.50B |
| Operating cash flow | $55.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$13.0B |

**Net income (GAAP)**

My Q4 2026 forecast, including an assumed $1.5 billion net loss on equity securities.

**Depreciation of property and equipment**

My forecast: quarterly depreciation steps up from $8.4 billion in Q3 2026 as the capex ramp is placed in service.

**Stock-based compensation expense**

My forecast, up from $8.6 billion in Q3 2026 with AI hiring.

**Deferred income taxes**

My assumption of a modest quarter after the unusual first half.

**Assumed net loss on equity securities**

Add-back of my assumed non-cash mark-to-market loss on the equity portfolio.

**Accounts receivable**

My forecast: receivables build with revenue of about $142.5 billion.

**Inventory build for TPU system sales and devices**

My forecast: the company builds TPU inventory ahead of recognizing the revenue, and Q4 also carries device inventory for the holidays.

**Payables, accrued liabilities, deferred revenue, other assets and income taxes**

My assumption of a modest net source, typical of a high-spend quarter.

##### Capital spending — model forecast

These allocations are my forecast assumption, not a company-published split: I apply the company's Q3 2026 disclosure that about 65 percent of technical-infrastructure investment went to servers and networking equipment and 35 percent to data centers, assume roughly 93 percent of Q4 capex is technical infrastructure, and leave the remainder unallocated for office facilities and Other Bets, which the company includes in capex but does not split out.

| Servers and networking equipment | $41.0B |
| --- | --- |
| Data centers | $22.0B |
| Unallocated capital spending | $5.00B |
| Total capital spending | $68.0B |

**Servers and networking equipment** My assumption: the Q3 share of technical infrastructure held in Q4, applied to the quarter it takes to reach the midpoint of the company's unchanged $195-205 billion full-year guidance.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My assumption: the remaining share of technical infrastructure.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We generated strong operating cash flow of $42.3 billion in the third quarter and $179.6 billion for the trailing 12 months.” “CapEx was $51.4 billion in the third quarter, with the vast majority of the spend in technical infrastructure to support our investments in AI.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.” “We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $37.4B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $20.0B |
| Working-capital and other operating movements | $7.60B |
| Operating cash flow | $65.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$3.05B |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the base EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast non-cash add-backs as infrastructure depreciation and employee equity compensation rise.

**Working-capital and other operating movements**

Forecast seasonal collections and accruals, partly offset by inventory for systems sales.

##### Capital spending — model forecast

The base case uses the midpoint of the company's 2026 capital-spending range less reported nine-month spending. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $39.8B |
| --- | --- |
| data centers | $21.4B |
| Unallocated capital spending | $6.80B |
| Total capital spending | $68.0B |

**servers and networking equipment** My allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not a company-issued allocation for the quarter.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not a company-issued allocation for the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $39.7B |
| --- | --- |
| Depreciation of property and equipment | $9.70B |
| Stock-based compensation expense | $8.90B |
| Deferred income taxes and other non-cash adjustments | $1.50B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | −$3.81B |
| Operating cash flow | $56.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$12.0B |

**Net income**

Fourth quarter 2026 base net income of 39.71 billion dollars matches our quarterly income statement forecast (39.412 billion dollars of net income available to common stockholders for 3.17 dollars per diluted share across 12,440 million shares, plus 298 million dollars of preferred stock dividends, with zero forecasted equity securities gains).

**Depreciation of property and equipment**

Depreciation increases from 8.369 billion dollars in the third quarter to 9.70 billion dollars in the fourth quarter as third-quarter and fourth-quarter server additions enter service.

**Stock-based compensation expense**

Stock-based compensation increases modestly from 8.63 billion dollars in the third quarter to 8.90 billion dollars.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.50 billion dollars of operating deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

Reflects a 3.81 billion dollar net working capital outflow from seasonal fourth-quarter accounts receivable build (+15.3 billion dollars sequential revenue increase) and continued tensor processing unit inventory build, partially offset by higher fourth-quarter accrued expenses, accounts payable, and Cloud deferred revenue, with no repeat of the third quarter's 5.2 billion dollar European Commission fine payment.

##### Capital spending — model forecast

With 131.953 billion dollars of capital spending reported in the first nine months of 2026, reaching the 200.0 billion dollar midpoint of management's 195 billion to 205 billion dollar full-year guidance implies 68.047 billion dollars of capital spending in the fourth quarter. Following management's third-quarter disclosure that the vast majority of capital spending goes to technical infrastructure (65 percent servers and networking equipment, 35 percent data centers), we allocate 66.3 billion dollars across those two categories and leave 1.747 billion dollars unallocated for office facilities and other corporate assets.

| servers and networking equipment | $43.1B |
| --- | --- |
| data centers | $23.2B |
| Unallocated capital spending | $1.75B |
| Total capital spending | $68.0B |

**servers and networking equipment** Allocates roughly 65 percent of fourth quarter 2026 technical infrastructure capital spending (43.1 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of fourth quarter 2026 technical infrastructure capital spending (23.2 billion dollars) to data centers.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.” “Our sizable investments in technical infrastructure and inventory build of TPU systems as we scale that business will put pressure on free cash flows.”

**DeepSeek V4.1 Flash**

| net income | $37.4B |
| --- | --- |
| depreciation of property and equipment | $9.40B |
| stock-based compensation | $9.20B |
| deferred income taxes | $3.00B |
| inventory for TPU systems | −$6.00B |
| accounts receivable | −$4.00B |
| other assets | −$3.00B |
| accounts payable and accrued expenses | $3.50B |
| income taxes payable | $2.00B |
| deferred revenue | $1.50B |
| Operating cash flow | $53.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$15.0B |

**net income**

Forecast GAAP net income on the planned income statement at a 19.5% tax rate, with no equity securities gain assumed, so it equals the adjusted basis.

**depreciation of property and equipment**

Third quarter was $8.4 billion; the ramp in capital spending lifts this every quarter.

**stock-based compensation**

Third quarter was $8.6 billion and keeps rising with headcount and awards.

**deferred income taxes**

Deferred tax added $33.1 billion to cash flow in the first nine months of 2026 and keeps adding.

**inventory for TPU systems**

The company builds TPU systems into inventory before billing, so cash goes out ahead of revenue.

**accounts receivable**

Fourth-quarter revenue growth lifts receivables.

**other assets**

Prepaid capacity, energy and land agreements.

**accounts payable and accrued expenses**

Payables for components and accrued compensation at year end.

**income taxes payable**

Timing of quarterly tax payments.

**deferred revenue**

Cloud and subscription billings collected in advance.

##### Capital spending — model forecast

The company's quoted plan is only a $195-205 billion range for 2026 with no project-level split, and I take the middle, $68 billion for the fourth quarter. I allocate it with the split the company does disclose for technical infrastructure, about 65% servers and networking equipment and 35% data centers, and treat technical infrastructure as about 96% of total spending, leaving a small amount for Waymo and building work. The amounts are my estimates of spending, not company guidance, and nothing is left unallocated. Timing: component and construction payments catch up toward year end as the ramp the company described continues.

| servers and networking equipment | $42.4B |
| --- | --- |
| data centers | $22.8B |
| Waymo | $2.80B |
| Unallocated capital spending | $0 |
| Total capital spending | $68.0B |

**servers and networking equipment** My estimate of the 65% servers and networking share of technical infrastructure within a $68 billion fourth quarter.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate of the 35% data-center share of technical infrastructure, including construction payments due in the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of the small remainder outside technical infrastructure, mainly Waymo and building work.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “We generated strong operating cash flow of $42.3 billion in the third quarter and $179.6 billion for the trailing 12 months.” “We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

High about 1 chance in 10 of better

Q4-2026

**$150B** sales · +5% vs base

**$3.40** EPS · +13% vs base

**$72.4B** Capital spending

**−$10.6B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $61.7B |
| --- | --- |
| Less capital spending | −$72.4B |
| Free cash flow | −$10.6B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $41.3B |
| --- | --- |
| Depreciation of property and equipment | $9.60B |
| Stock-based compensation expense | $8.80B |
| Deferred income taxes | $2.50B |
| TPU inventory build, receivables and other assets | −$6.20B |
| Operating cash flow | $56.0B |
| Less capital spending | −$71.0B |
| Free cash flow | −$15.0B |

**Net income**

High-case earnings of $3.30 a share plus the preferred dividend.

**Depreciation of property and equipment**

Slightly faster deployment.

**Stock-based compensation expense**

Near the third-quarter level.

**Deferred income taxes**

Higher with higher profit.

**TPU inventory build, receivables and other assets**

TPU deliveries turn inventory into receivables and cash faster.

##### Capital spending — model forecast

Spending near the top of the guidance range to meet demand. 5% is unallocated.

| servers and networking equipment | $43.8B |
| --- | --- |
| data centers | $23.6B |
| Unallocated capital spending | $3.55B |
| Total capital spending | $71.0B |

**servers and networking equipment** 65% of the 95% technical-infrastructure share; my assumption.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** 35% of technical infrastructure; my assumption.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

**GPT-6.1 Sol**

| Net income before preferred dividends | $42.3B |
| --- | --- |
| Depreciation | $10.0B |
| Stock-based compensation | $9.50B |
| Deferred income taxes | $4.00B |
| Accounts receivable | −$8.00B |
| Inventory | −$4.00B |
| Accounts payable | $1.50B |
| Accrued expenses and other liabilities | $6.00B |
| Deferred revenue | $2.00B |
| Other operating assets | −$1.00B |
| Operating cash flow | $62.3B |
| Less capital spending | −$73.0B |
| Free cash flow | −$10.7B |

**Net income before preferred dividends**

High adjusted earnings of $3.38 times 12.43 billion shares plus $298 million preferred dividends; no forecast equity gain.

**Depreciation**

Near-term expense remains tied to the installed base.

**Stock-based compensation**

Award expense remains close to the base.

**Deferred income taxes**

Tax versus book depreciation timing.

**Accounts receivable**

More deliveries also mean more uncollected revenue.

**Inventory**

Faster shipments moderate, but do not end, the inventory build.

**Accounts payable**

Greater operating purchases receive supplier credit.

**Accrued expenses and other liabilities**

Year-end accruals scale with activity.

**Deferred revenue**

Stronger bookings support advance billing.

**Other operating assets**

Operating prepayments continue.

##### Capital spending — model forecast

The annual high is $205 billion, at the top of the stated range. Technical allocations are estimates; the remainder is deliberately unallocated rather than assigned to undisclosed projects. Strong earnings do not eliminate inventory cash needs.

| servers and networking equipment | $45.0B |
| --- | --- |
| data centers | $25.0B |
| Unallocated capital spending | $3.05B |
| Total capital spending | $73.0B |

**servers and networking equipment** My estimate of accelerated machine deliveries in a strong-demand case.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate of faster construction and cash payments.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $40.0B |
| --- | --- |
| Depreciation of property and equipment | $9.70B |
| Stock-based compensation expense | $9.10B |
| Deferred income taxes | $2.00B |
| Assumed net loss on equity securities | $1.50B |
| Accounts receivable | −$4.50B |
| Inventory build for TPU system sales and devices | −$3.00B |
| Payables, accrued liabilities, deferred revenue, other assets and income taxes | $5.20B |
| Operating cash flow | $60.0B |
| Less capital spending | −$71.0B |
| Free cash flow | −$11.0B |

**Net income (GAAP)**

Higher earnings on stronger revenue and cloud margin.

**Depreciation of property and equipment**

My forecast.

**Stock-based compensation expense**

My forecast.

**Deferred income taxes**

My assumption.

**Assumed net loss on equity securities**

Add-back of my assumed loss.

**Accounts receivable**

Smaller build.

**Inventory build for TPU system sales and devices**

Faster deliveries and billing.

**Payables, accrued liabilities, deferred revenue, other assets and income taxes**

My assumption.

##### Capital spending — model forecast

My assumption at the top of the guidance-implied Q4 range with the same category shares.

| Servers and networking equipment | $43.0B |
| --- | --- |
| Data centers | $23.0B |
| Unallocated capital spending | $5.00B |
| Total capital spending | $71.0B |

**Servers and networking equipment** My allocation at a higher Q4 capex.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My allocation of the data-center share.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $43.2B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $21.0B |
| Working-capital and other operating movements | $8.80B |
| Operating cash flow | $73.0B |
| Less capital spending | −$73.0B |
| Free cash flow | −$47.0M |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the high EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast non-cash add-backs as infrastructure depreciation and employee equity compensation rise.

**Working-capital and other operating movements**

Forecast stronger collections and accruals, partly offset by a larger systems-inventory build.

##### Capital spending — model forecast

The high case uses the top of the company's 2026 capital-spending range less reported nine-month spending. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $42.7B |
| --- | --- |
| data centers | $23.0B |
| Unallocated capital spending | $7.30B |
| Total capital spending | $73.0B |

**servers and networking equipment** My allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not a company-issued allocation for the quarter.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not a company-issued allocation for the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $43.6B |
| --- | --- |
| Depreciation of property and equipment | $9.85B |
| Stock-based compensation expense | $8.95B |
| Deferred income taxes and other non-cash adjustments | $1.60B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | −$2.99B |
| Operating cash flow | $61.0B |
| Less capital spending | −$73.0B |
| Free cash flow | −$12.0B |

**Net income**

High-case fourth quarter 2026 net income of 43.589 billion dollars equals 43.291 billion dollars of net income available to common stockholders (3.48 dollars per share across 12,440 million shares) plus 298 million dollars of preferred stock dividends.

**Depreciation of property and equipment**

Reflects 9.85 billion dollars of depreciation.

**Stock-based compensation expense**

Reflects 8.95 billion dollars of stock-based compensation expense.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.60 billion dollars of deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

Strong upfront Cloud deferred revenue billings and faster tensor processing unit deliveries reduce net working capital outflow to 2.989 billion dollars.

##### Capital spending — model forecast

In the high case, fourth quarter 2026 capital spending reaches 73.047 billion dollars (bringing full-year 2026 to the 205.0 billion dollar top end of guidance), with 71.2 billion dollars allocated to technical infrastructure and 1.847 billion dollars unallocated for office and corporate assets.

| servers and networking equipment | $46.3B |
| --- | --- |
| data centers | $24.9B |
| Unallocated capital spending | $1.85B |
| Total capital spending | $73.0B |

**servers and networking equipment** Allocates roughly 65 percent of technical infrastructure capital spending (46.3 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of technical infrastructure capital spending (24.9 billion dollars) to data centers.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**DeepSeek V4.1 Flash**

| net income | $43.0B |
| --- | --- |
| depreciation of property and equipment | $9.60B |
| stock-based compensation | $9.30B |
| deferred income taxes | $4.00B |
| inventory for TPU systems | −$7.00B |
| accounts receivable | −$5.00B |
| other assets | −$4.00B |
| accounts payable and accrued expenses | $5.00B |
| income taxes payable | $2.00B |
| deferred revenue | $1.10B |
| Operating cash flow | $58.0B |
| Less capital spending | −$73.0B |
| Free cash flow | −$15.0B |

**net income**

Stronger Cloud and advertising revenue with a slightly better margin, at a 19.5% tax rate and no equity securities gain.

**depreciation of property and equipment**

More assets in service as spending runs to the top of the range.

**stock-based compensation**

Compensation growth with faster hiring.

**deferred income taxes**

A larger deferred tax benefit as capital spending accelerates tax depreciation.

**inventory for TPU systems**

A larger build of TPU systems ahead of billing as system sales scale.

**accounts receivable**

Stronger revenue lifts receivables more.

**other assets**

Prepaid capacity and energy agreements.

**accounts payable and accrued expenses**

Payables rise with faster component purchases.

**income taxes payable**

Timing of quarterly tax payments.

**deferred revenue**

Cloud and subscription billings in advance.

##### Capital spending — model forecast

A stronger demand picture pushes my forecast spending to the top of the company's quoted $195-205 billion 2026 range, $73 billion in the fourth quarter, still allocated with the disclosed 65% servers and networking, 35% data centers split of technical infrastructure plus a small Waymo and building remainder. The amounts are my estimates of spending, not company guidance, and everything is allocated.

| servers and networking equipment | $45.6B |
| --- | --- |
| data centers | $24.5B |
| Waymo | $2.90B |
| Unallocated capital spending | $0 |
| Total capital spending | $73.0B |

**servers and networking equipment** My estimate at the top of the company's 2026 range using the 65% servers share.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate at the 35% data-center share, with construction pulled forward.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of the small non-technical-infrastructure remainder, mostly Waymo and building work.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “At the end of the third quarter, we had future purchase commitments of $924 billion and pre-commencement leases and other obligations of $152 billion.” “We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx.”

#### Three ways the high case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Chip systems ship faster than planned.** The company expects chip-system sales to keep scaling this quarter, with most of the revenue in 2027. Pulling deliveries into the quarter lifts Cloud sales and turns inventory into receivables and cash. Opus's high has rented capacity relieving supply so Cloud jumps well above the base. Spending also runs to the top of guidance: Q4-2026 high cash capex, average: $72.4B.
  Watch Fourth-quarter Cloud revenue rising faster than it did in the third quarter, with backlog still climbing.
  **Model reasoning**
  - **Opus 5.5** Supply relief lifts Cloud above $40 billion a quarter
  - **GLM 5.3** Faster TPU system deliveries and revenue recognition against committed contracts
  - **Kimi K3.1 Pro** Larger cloud systems ramp and quicker capacity additions
2. **Ads in AI Mode pay off faster worldwide.** The company is scaling ads in AI Overviews and AI Mode to more users and taking them global. Search holds its third-quarter pace despite the tough comparison, adding high-margin sales that flow almost directly to earnings without extra spending.
  Watch Search growth matching or beating the third quarter's pace.
  **Model reasoning**
  - **Opus 5.5** Faster monetization of AI Mode ads
  - **GLM 5.3** Search growth re-accelerating above 12 percent as AI-mode monetization scales globally
3. **Cloud margins hold despite rented capacity.** Cloud's margin jumped in the third quarter and bridging capacity had little effect before quarter end. If scale outruns rental costs, the operating margin stays near the third quarter's and earnings rise faster than sales.
  Watch Cloud operating margin at or above the third quarter's.
  **Model reasoning**
  - **GLM 5.3** Cloud operating margin holding in the mid-30s as scale outruns third-party capacity costs
  - **DeepSeek V4.1 Flash** Depreciation absorbed by revenue scale so margin holds

Sales near Q4-2026 sales high, average: $150B and earnings per share near Q4-2026 adjusted EPS high, average: $3.40 need chip systems to ship faster, ads in AI Mode to pay off sooner and Cloud margins to hold despite rented capacity. Kimi's high is furthest, Q4-2026 sales high, kimi: $154B, because it alone adds quicker capacity additions to a larger systems ramp. Gemini reaches the top earnings, Q4-2026 adjusted EPS high, gemini: $3.48, by holding margins near the third quarter's through efficiency.

Cloud more than doubled in the third quarter, Cloud revenues were up 103% to $30.7 billion, and rented capacity arrived only at the very end of that quarter.

The six highs run from $146B (GLM 5.3) to $154B (Kimi K3.1 Pro).

First sign The fourth-quarter report, date not yet given: a strong step up in Cloud revenue with a steady margin.

Low about 1 chance in 10 of worse

Q4-2026

**$136B** sales · −5% vs base

**$2.63** EPS · −13% vs base

**$64.2B** Capital spending

**−$15.5B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $48.7B |
| --- | --- |
| Less capital spending | −$64.2B |
| Free cash flow | −$15.5B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $33.2B |
| --- | --- |
| Depreciation of property and equipment | $9.50B |
| Stock-based compensation expense | $8.80B |
| Deferred income taxes | $1.50B |
| TPU inventory build, receivables and other assets | −$9.00B |
| Operating cash flow | $44.0B |
| Less capital spending | −$65.0B |
| Free cash flow | −$21.0B |

**Net income**

Low-case common earnings of $2.65 a share on 12,425 million shares, plus the preferred dividend; no equity-securities gain assumed.

**Depreciation of property and equipment**

Rising from $8.4 billion in the third quarter as new servers enter service.

**Stock-based compensation expense**

Near the third quarter's $8.6 billion.

**Deferred income taxes**

Smaller than recent quarters with no securities gains.

**TPU inventory build, receivables and other assets**

Heavier inventory build ahead of delayed TPU deliveries.

##### Capital spending — model forecast

Capital spending ends near the bottom of the $195-205 billion range. 5% is left unallocated for offices, Waymo and other items the company does not split out.

| servers and networking equipment | $40.1B |
| --- | --- |
| data centers | $21.6B |
| Unallocated capital spending | $3.25B |
| Total capital spending | $65.0B |

**servers and networking equipment** My assumption: 95% of spending is technical infrastructure, split 65% to this category as in the third quarter.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** The remaining 35% of technical infrastructure, as in the third quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

**GPT-6.1 Sol**

| Net income before preferred dividends | $30.8B |
| --- | --- |
| Depreciation | $10.0B |
| Stock-based compensation | $9.50B |
| Deferred income taxes | $4.00B |
| Accounts receivable | −$5.00B |
| Inventory | −$7.00B |
| Accounts payable | $1.00B |
| Accrued expenses and other liabilities | $3.00B |
| Deferred revenue | $1.00B |
| Other operating assets | −$2.00B |
| Operating cash flow | $45.3B |
| Less capital spending | −$65.0B |
| Free cash flow | −$19.8B |

**Net income before preferred dividends**

Forecast low adjusted common earnings of $2.45 times 12.43 billion diluted shares, plus $298 million preferred dividends. Equity-security gains are assumed zero.

**Depreciation**

Installed infrastructure continues depreciating despite weaker sales.

**Stock-based compensation**

Awards and technical hiring remain committed.

**Deferred income taxes**

Forecast book versus cash depreciation timing.

**Accounts receivable**

Seasonal sales and longer collection cycles absorb cash.

**Inventory**

Slower system deliveries leave more inventory awaiting revenue.

**Accounts payable**

Supplier credit finances part of procurement.

**Accrued expenses and other liabilities**

Year-end operating accruals partially fund cash needs.

**Deferred revenue**

Contract billing modestly leads delivery.

**Other operating assets**

Prepayments and deposits rise with the infrastructure program.

##### Capital spending — model forecast

The annual low spending case is $197 billion, including disclosed nine-month purchases. Most remaining cash spending goes to technical infrastructure. Other property, timing and business allocations are not disclosed sufficiently to divide the remainder. Customer-system inventory is not included in this capital allocation.

| servers and networking equipment | $40.0B |
| --- | --- |
| data centers | $22.0B |
| Unallocated capital spending | $3.05B |
| Total capital spending | $65.0B |

**servers and networking equipment** My allocation of the lower spending case; not company guidance.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My construction-payment estimate; much of the program cannot adjust immediately.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $33.0B |
| --- | --- |
| Depreciation of property and equipment | $9.30B |
| Stock-based compensation expense | $8.90B |
| Deferred income taxes | $1.00B |
| Assumed net loss on equity securities | $1.50B |
| Accounts receivable | −$6.50B |
| Inventory build for TPU system sales and devices | −$5.00B |
| Payables, accrued liabilities, deferred revenue, other assets and income taxes | $7.80B |
| Operating cash flow | $50.0B |
| Less capital spending | −$66.0B |
| Free cash flow | −$16.0B |

**Net income (GAAP)**

Lower earnings as revenue and margins disappoint.

**Depreciation of property and equipment**

My forecast.

**Stock-based compensation expense**

My forecast.

**Deferred income taxes**

My assumption.

**Assumed net loss on equity securities**

Add-back of my assumed loss.

**Accounts receivable**

Larger build as collections slow.

**Inventory build for TPU system sales and devices**

Larger build while deliveries slip.

**Payables, accrued liabilities, deferred revenue, other assets and income taxes**

My assumption.

##### Capital spending — model forecast

My assumption at the bottom of the guidance-implied Q4 range with the same category shares.

| Servers and networking equipment | $40.0B |
| --- | --- |
| Data centers | $21.5B |
| Unallocated capital spending | $4.50B |
| Total capital spending | $66.0B |

**Servers and networking equipment** My allocation at a lower Q4 capex.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My allocation of the data-center share.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $32.0B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $19.0B |
| Working-capital and other operating movements | $7.00B |
| Operating cash flow | $58.0B |
| Less capital spending | −$63.0B |
| Free cash flow | −$5.05B |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the low EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast non-cash add-backs as infrastructure depreciation and employee equity compensation rise.

**Working-capital and other operating movements**

Forecast seasonal collections and accruals, partly offset by inventory for systems sales.

##### Capital spending — model forecast

The low case uses the bottom of the company's 2026 capital-spending range less reported nine-month spending. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $36.9B |
| --- | --- |
| data centers | $19.9B |
| Unallocated capital spending | $6.30B |
| Total capital spending | $63.0B |

**servers and networking equipment** My allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not a company-issued allocation for the quarter.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not a company-issued allocation for the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $35.9B |
| --- | --- |
| Depreciation of property and equipment | $9.55B |
| Stock-based compensation expense | $8.85B |
| Deferred income taxes and other non-cash adjustments | $1.40B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | −$4.68B |
| Operating cash flow | $51.0B |
| Less capital spending | −$63.0B |
| Free cash flow | −$12.0B |

**Net income**

Low-case fourth quarter 2026 net income of 35.876 billion dollars equals 35.578 billion dollars of net income available to common stockholders (2.86 dollars per share across 12,440 million shares) plus 298 million dollars of preferred stock dividends.

**Depreciation of property and equipment**

Reflects 9.55 billion dollars of depreciation.

**Stock-based compensation expense**

Reflects 8.85 billion dollars of stock-based compensation expense.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.40 billion dollars of deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

Slower customer collections and higher unsold tensor processing unit inventory result in a 4.676 billion dollar working capital outflow.

##### Capital spending — model forecast

In the low case, fourth quarter 2026 capital spending is 63.047 billion dollars (bringing full-year 2026 to the 195.0 billion dollar bottom end of guidance), with 61.5 billion dollars allocated to technical infrastructure and 1.547 billion dollars unallocated for office and corporate assets.

| servers and networking equipment | $40.0B |
| --- | --- |
| data centers | $21.5B |
| Unallocated capital spending | $1.55B |
| Total capital spending | $63.0B |

**servers and networking equipment** Allocates roughly 65 percent of technical infrastructure capital spending (40.0 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of technical infrastructure capital spending (21.5 billion dollars) to data centers.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**DeepSeek V4.1 Flash**

| net income | $29.0B |
| --- | --- |
| depreciation of property and equipment | $9.40B |
| stock-based compensation | $9.20B |
| deferred income taxes | $2.00B |
| inventory for TPU systems | −$3.00B |
| accounts receivable | −$2.00B |
| other assets | −$1.50B |
| accounts payable and accrued expenses | −$500M |
| income taxes payable | −$1.00B |
| deferred revenue | $2.40B |
| Operating cash flow | $44.0B |
| Less capital spending | −$63.0B |
| Free cash flow | −$19.0B |

**net income**

Weaker Cloud and advertising revenue with a lower margin, at a 19.5% tax rate and no equity securities gain.

**depreciation of property and equipment**

Depreciation keeps rising with the 2026 spending ramp.

**stock-based compensation**

Third quarter was $8.6 billion; awards and headcount keep growing.

**deferred income taxes**

A smaller deferred tax benefit than in the base case.

**inventory for TPU systems**

Slower system deliveries mean a smaller inventory build.

**accounts receivable**

Receivables grow with the weaker quarterly revenue.

**other assets**

Prepayments for capacity and energy.

**accounts payable and accrued expenses**

Payables stall as spending is held near the low end.

**income taxes payable**

Timing of quarterly tax payments.

**deferred revenue**

Cloud and subscription billings in advance.

##### Capital spending — model forecast

The company quotes only a $195-205 billion 2026 range and no project split. I hold technical infrastructure at about 96% of my forecast spending and split that using the 65% servers and networking, 35% data centers split the company disclosed for the third quarter; the rest is Waymo and building work. A weaker AI demand picture puts my spending at the bottom of the range. These are my spending estimates, not company guidance, and everything is allocated.

| servers and networking equipment | $39.4B |
| --- | --- |
| data centers | $21.0B |
| Waymo | $2.60B |
| Unallocated capital spending | $0 |
| Total capital spending | $63.0B |

**servers and networking equipment** My estimate at the bottom of the company's 2026 range, using the 65% servers share it disclosed for technical infrastructure.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate at the 35% data-center share of technical infrastructure the company disclosed.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of the small non-technical-infrastructure part of spending, mostly Waymo and building work.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx.” “Operating cash flow was negatively impacted by the buildup of inventory for TPU system sales, as well as a $5.2 billion cash payment for a 2018 EC fine following the conclusion of the appeal process.”

#### Three ways the low case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Search slows faster than the tougher comparison explains.** The company itself flagged lapping last year's acceleration and a slightly larger currency drag this quarter. Search is the largest profit pool, so a weaker holiday quarter cuts sales and drops almost fully into earnings, because costs are largely set. Opus's low has Search growth falling into single digits, and GLM adds a stronger dollar cutting reported international sales.
  Watch Search growth well below the third quarter's pace at the fourth-quarter report, date not yet given.
  **Model reasoning**
  - **Opus 5.5** Search growth falls below 9%
  - **GLM 5.3** A stronger US dollar cutting reported international revenue growth
2. **Chip-system deliveries slip into 2027.** Hardware revenue is booked only when systems ship, so it swings from quarter to quarter. Cloud sales fall short within the quarter while inventory already bought stays on the balance sheet, so operating cash flow weakens alongside earnings. DeepSeek's low cuts Cloud growth hardest.
  Watch Fourth-quarter Cloud revenue barely above the third quarter's, or inventory rising again.
  **Model reasoning**
  - **DeepSeek V4.1 Flash** Cloud and TPU system deliveries at the low end, plus the cost of third-party bridging compute
  - **Opus 5.5** TPU system deliveries slip between quarters.
  - **GLM 5.3** TPU system revenue recognized later than planned, since shipments are lumpy and recognized when delivered
3. **Rented compute and depreciation squeeze margins harder.** The company began renting third-party capacity late in the third quarter and expects near-term margin headwinds. Rental and depreciation costs rise faster than sales, so the operating margin slips below the base and earnings fall more than sales. Spending still lands near the low end of guidance, so cash stays negative: Q4-2026 low cash fcf, average: −$15.5B.
  Watch Cloud operating margin falling well below the third quarter's at the next report.
  **Model reasoning**
  - **GPT-6.1 Sol** Fixed infrastructure and research costs plus inventory cash absorption
  - **Kimi K3.1 Pro** Third-party computing and depreciation pressure on margins

Sales would have to stop near Q4-2026 sales low, average: $136B and earnings per share near Q4-2026 adjusted EPS low, average: $2.63. That needs Search to slow more than the tougher comparison explains, chip-system deliveries to slip into next year, and rented compute and depreciation to squeeze margins. DeepSeek's low is furthest, Q4-2026 sales low, deepseek: $132B, because it alone lets Cloud growth stall well short of a doubling. Sol's earnings low, Q4-2026 adjusted EPS low, sol: $2.45, is deepest because it holds infrastructure and research costs fixed while capacity earns less than expected.

Third-quarter sales matched the models, but earnings per share missed: Q3-2026 adjusted EPS, reported against our forecast: −9.3%, as hardware costs for chip systems and depreciation lifted the cost of revenues.

The six lows run from $132B (DeepSeek V4.1 Flash) to $138B (GLM 5.3).

First sign The fourth-quarter report, date not yet given: Cloud revenue flat with the third quarter, or Search slowing sharply.

#### Watch

At the fourth-quarter report, date not yet given: Cloud revenue against the third quarter, the Cloud margin after rented capacity, Search growth against the tough comparison, and inventory. A strong Cloud step with a steady margin points higher; flat Cloud or a falling margin points lower.

### Q1 2027 · the quarter after

First quarter 2027: the models expect Q1-2027 sales middle, average: $141B, a seasonal step down from the holiday quarter while Cloud keeps growing.

Sales **$141B** +29% on Q1 2026 ($110B)

*50% range* $137B – $145B *80% range* $133B – $150B

Adjusted EPS **$2.94** +6% on Q1 2026 ($2.76: $5.11 reported, less $2.35 for gain (loss) on equity securities, net, in the Q1 2026 release)

*50% range* $2.74 – $3.13 *80% range* $2.53 – $3.35

#### Investment and cash generation

Base case

Capital spending **$64.8B**

Free cash flow **−$13.1B**

Free cash flow: operating cash flow less capital spending.

- **Q1-2027 base cash capex, average: $64.8B adds capacity mostly for later 2027. Bonus payouts and chip inventory hold Q1-2027 base cash operating_cash_flow, average: $51.7B below spending, so Q1-2027 base cash fcf, average: −$13.1B, measured as operating cash flow less capital spending; only Gemini expects positive cash. *3 of 6***
  - **DeepSeek V4.1 Flash** That trajectory is what I extrapolate to about $68 billion in the fourth quarter and about $70 billion in the first quarter of 2027.
  - **Gemini 4 Argon** first-quarter operating cash flow typically benefits from fourth-quarter ad receivable collections
  - **GPT-6.1 Sol** a rapid hardware-sales ramp can lift reported revenue while absorbing inventory cash and diluting margins

The first quarter of 2027 is the one the company would frame at its fourth-quarter report, but Alphabet gives no sales outlook. The models lean on the seasonal pattern: advertising and devices peak in the holiday quarter and fall back in the first, while Cloud keeps growing.

Against a year earlier the growth looks large, Q1-2027 sales middle growth on Q1-2026, average: +29%, because chip-system sales had not yet begun in early 2026. Q1-2026 sales, reported: $110B

Earnings per share, leaving out swings in the value of stock holdings: Q1-2027 adjusted EPS middle, average: $2.94, or Q1-2027 adjusted EPS middle growth on Q1-2026, average: +6.5%. Depreciation steps up as fourth-quarter servers enter service, research spending keeps growing, and interest on new debt rises.

Sol stands apart. It alone has sales rising from the fourth quarter, because it puts Cloud much higher as the 2027 hardware ramp begins. DeepSeek expects the deepest seasonal dip and the lowest earnings.

The range, Q1-2027 sales low, average: $133B to Q1-2027 sales high, average: $150B, is wider than for the fourth quarter, reflecting how uncertain the timing of hardware deliveries is.

Earnings per share exclude equity-security swings. They rest on Cloud growth against higher depreciation and research costs, more interest on new debt, preferred dividends, and slightly more shares.

#### What it rests on

**Most system revenue 2027**

The company expected a small part of chip-system revenue in 2026 and the vast majority in 2027. “We expect to begin recognizing a small percent of the revenues from these agreements later this year with the vast majority of revenues to be realized in 2027.” First-quarter 2026 earnings call

**Hardware revenue is lumpy**

Chip hardware revenue will swing from quarter to quarter depending on when systems ship. “It is important to keep in mind that revenues from TPU hardware sales will fluctuate from quarter to quarter depending on when TPUs are shipped to customers.” First-quarter 2026 earnings call

**Spending rises in 2027**

The company expects capital spending to increase significantly in 2027, with details at the fourth-quarter call. “We continue to expect our CAPEX to increase significantly in 2027” Third-quarter 2026 earnings call

**Backlog converts over two years**

Just over half of Cloud's backlog is expected to become revenue over the next two years. “We expect to recognize just over 55% of the total backlog as revenues over the next 24 months.” Third-quarter 2026 earnings call

#### The six models

Five models see sales dipping from the holiday quarter; Sol alone sees a rise. Q1-2027 sales middle, highest model: $146B is Sol's, holding that “Cloud and direct accelerator-system sales drive faster consolidated growth despite a more moderate consumer advertising trajectory”. Q1-2027 sales middle, lowest model: $136B is DeepSeek's, with the deepest seasonal dip, holding that a Cloud led by system sales “mixes revenue up but margin down”, which also gives it the lowest earnings. Gemini expects the highest earnings on steadier margins.

**Middle** the forecast **50% range** 1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside. **80% range** 1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.

PricedIn **$141B** $133B – $150B

$135B $140B $145B $150B

##### adjusted EPS

PricedIn **$2.94** $2.53 – $3.35

$2.60 $2.80 $3.00 $3.20 $3.40

#### Low and high

Base the middle forecast

Key assumptions

- ****Services sales step down seasonally from the holiday quarter.** Advertising and devices peak in the fourth quarter and fall back in the first. *2 of 6***
  - **Opus 5.5** services sales in the first quarter of 2027 about 6% below the fourth quarter
  - **Gemini 4 Argon** digital advertising and consumer hardware exhibit recurring fourth-quarter holiday seasonality followed by a first-quarter sequential step-down
- ****Cloud keeps growing as the backlog converts and the hardware ramp begins.** The company expects most chip-system revenue in 2027. *2 of 6***
  - **Opus 5.5** This supports putting most of the TPU hardware revenue in 2027, which drives my 22% sales growth for 2027.
  - **Kimi K3.1 Pro** The first-quarter call supports the 2027 systems-revenue ramp
- ****Depreciation steps up again as fourth-quarter servers enter service.** Quarterly spending roughly doubled in a year. *2 of 6***
  - **DeepSeek V4.1 Flash** Depreciation roughly doubles every two years at this level of spending
  - **GLM 5.3** I carry roughly $31 billion in 2026 and about $48 billion in 2027, which is the main reason operating margin compresses toward the low 30s in my forecast.

If all of this happens

**$141B** sales

**$2.94** adjusted EPS

**$64.8B** Capital spending

**−$13.1B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $51.7B |
| --- | --- |
| Less capital spending | −$64.8B |
| Free cash flow | −$13.1B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $37.0B |
| --- | --- |
| Depreciation of property and equipment | $11.0B |
| Stock-based compensation expense | $9.00B |
| Deferred income taxes | $1.00B |
| Bonus payments, inventory and receivables | −$6.00B |
| Operating cash flow | $52.0B |
| Less capital spending | −$65.0B |
| Free cash flow | −$13.0B |

**Net income**

The quarter plan's net income, matching earnings of $2.95 a share.

**Depreciation of property and equipment**

Rising from about $9.5 billion in the fourth quarter.

**Stock-based compensation expense**

Near the recent run rate.

**Deferred income taxes**

Small continued deferral.

**Bonus payments, inventory and receivables**

First-quarter bonus payouts, partly offset by fourth-quarter receivables collected.

##### Capital spending — model forecast

First-quarter spending of $65 billion, a bit under a quarter of my $290 billion for 2027, ramping through the year. 5% is unallocated.

| servers and networking equipment | $40.1B |
| --- | --- |
| data centers | $21.6B |
| Unallocated capital spending | $3.25B |
| Total capital spending | $65.0B |

**servers and networking equipment** My assumption: 65% of 95% technical infrastructure.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** My assumption: 35% of technical infrastructure.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We continue to expect our CAPEX to increase significantly in 2027”

**GPT-6.1 Sol**

| Net income before preferred dividends | $36.9B |
| --- | --- |
| Depreciation | $11.0B |
| Stock-based compensation | $10.0B |
| Deferred income taxes | $2.00B |
| Accounts receivable | −$1.00B |
| Inventory | −$5.00B |
| Accrued expenses and other liabilities | −$6.00B |
| Accounts payable | $1.00B |
| Deferred revenue | $1.00B |
| Other operating assets | −$2.00B |
| Operating cash flow | $47.9B |
| Less capital spending | −$66.0B |
| Free cash flow | −$18.1B |

**Net income before preferred dividends**

Matches the quarter income plan; no equity-security gain or loss assumed.

**Depreciation**

Additional assets begin depreciating after the prior-year ramp.

**Stock-based compensation**

Continued technical awards and staffing.

**Deferred income taxes**

Cash tax depreciation timing benefit.

**Accounts receivable**

Cloud invoices offset much of the seasonal consumer collections benefit.

**Inventory**

Continued hardware procurement before delivery.

**Accrued expenses and other liabilities**

Seasonal payment of compensation and operating accruals.

**Accounts payable**

Operating supplier credit.

**Deferred revenue**

Some enterprise billings lead recognition.

**Other operating assets**

Operating deposits and prepayments increase.

##### Capital spending — model forecast

My $66 billion quarterly spend fits the $290 billion annual base with investment weighted later in the year. Allocations are estimates using disclosed categories, not a management forecast split; the remainder cannot be responsibly allocated.

| servers and networking equipment | $40.0B |
| --- | --- |
| data centers | $23.0B |
| Unallocated capital spending | $3.00B |
| Total capital spending | $66.0B |

**servers and networking equipment** My first-quarter machine and networking forecast as capacity expands.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My construction-payment estimate within the annual base plan.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $36.1B |
| --- | --- |
| Depreciation of property and equipment | $11.5B |
| Stock-based compensation expense | $9.50B |
| Deferred income taxes | $2.00B |
| Accounts receivable | −$6.00B |
| Inventory build for TPU system sales | −$5.00B |
| Other assets, payables, accrued liabilities, deferred revenue and income taxes | $1.90B |
| Operating cash flow | $50.0B |
| Less capital spending | −$62.0B |
| Free cash flow | −$12.0B |

**Net income (GAAP)**

My Q1 2027 forecast, matching the quarter plan.

**Depreciation of property and equipment**

My forecast: quarterly depreciation continues to step up from $8.4 billion in Q3 2026.

**Stock-based compensation expense**

My forecast, growing with AI hiring.

**Deferred income taxes**

My assumption of a normal quarter.

**Accounts receivable**

My forecast: receivables build with revenue.

**Inventory build for TPU system sales**

My forecast: inventory keeps building ahead of the 2027 revenue ramp.

**Other assets, payables, accrued liabilities, deferred revenue and income taxes**

My assumption of a modest net source.

##### Capital spending — model forecast

My own allocation of a quarter of my estimated 2027 capex, using the company's disclosed technical-infrastructure categories; the company has not published a 2027 plan. The unallocated remainder covers office facilities and Other Bets.

| Servers and networking equipment | $37.0B |
| --- | --- |
| Data centers | $20.0B |
| Unallocated capital spending | $5.00B |
| Total capital spending | $62.0B |

**Servers and networking equipment** My assumption for the first quarter of a significantly higher 2027 capex year, on the recent share.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My assumption for the data-center share.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “CapEx was $51.4 billion in the third quarter, with the vast majority of the spend in technical infrastructure to support our investments in AI.” “We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $36.8B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $20.0B |
| Working-capital and other operating movements | −$4.80B |
| Operating cash flow | $52.0B |
| Less capital spending | −$68.0B |
| Free cash flow | −$16.0B |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the base quarterly EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast depreciation and employee equity compensation on the expanding infrastructure base.

**Working-capital and other operating movements**

Forecast first-quarter seasonal compensation payments and systems inventory, partly offset by collections and deferred revenue.

##### Capital spending — model forecast

The base case assumes quarterly spending is flat with the 2026 fourth-quarter midpoint before rising later in 2027. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $39.8B |
| --- | --- |
| data centers | $21.4B |
| Unallocated capital spending | $6.80B |
| Total capital spending | $68.0B |

**servers and networking equipment** My allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not company guidance.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not company guidance.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $39.7B |
| --- | --- |
| Depreciation of property and equipment | $11.0B |
| Stock-based compensation expense | $8.80B |
| Deferred income taxes and other non-cash adjustments | $1.20B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | −$1.21B |
| Operating cash flow | $59.5B |
| Less capital spending | −$58.0B |
| Free cash flow | $1.50B |

**Net income**

First quarter 2027 base net income of 39.71 billion dollars equals 39.412 billion dollars of net income available to common stockholders (3.16 dollars per diluted share across 12,480 million shares, with zero forecasted equity securities gains) plus 298 million dollars of preferred stock dividends.

**Depreciation of property and equipment**

Depreciation rises to 11.0 billion dollars as fourth quarter 2026 and first quarter 2027 server and data center deployments enter service.

**Stock-based compensation expense**

Reflects 8.8 billion dollars of stock-based compensation expense.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.2 billion dollars of deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

First quarter working capital outflow is a modest 1.21 billion dollars as seasonal collections of fourth-quarter advertising receivables, cash inflows from tensor processing unit system deliveries, and first-quarter cash tax timing (with federal estimated tax payments due in April) largely offset annual employee bonus payouts.

##### Capital spending — model forecast

We model first quarter 2027 capital spending of 58.0 billion dollars (up 63 percent year over year from 35.674 billion dollars in the first quarter of 2026 as part of our 250 billion dollar full-year 2027 forecast), allocating 97.5 percent (56.55 billion dollars) to technical infrastructure and leaving 1.45 billion dollars unallocated for office facilities and other corporate assets.

| servers and networking equipment | $36.8B |
| --- | --- |
| data centers | $19.8B |
| Unallocated capital spending | $1.45B |
| Total capital spending | $58.0B |

**servers and networking equipment** Allocates roughly 65 percent of first quarter 2027 technical infrastructure capital spending (36.75 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of first quarter 2027 technical infrastructure capital spending (19.8 billion dollars) to data center construction.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.” “In Google Cloud, we expect TPU system sales to continue to scale in Q4, followed by a meaningful revenue ramp in 2027.”

**DeepSeek V4.1 Flash**

| net income | $35.2B |
| --- | --- |
| depreciation of property and equipment | $10.6B |
| stock-based compensation | $10.7B |
| deferred income taxes | $1.00B |
| accounts receivable | −$3.00B |
| inventory | −$3.00B |
| other assets | −$2.50B |
| accounts payable and accrued expenses | $1.50B |
| income taxes payable | −$1.00B |
| deferred revenue | $500M |
| other operating items | −$1.00B |
| Operating cash flow | $49.0B |
| Less capital spending | −$70.0B |
| Free cash flow | −$21.0B |

**net income**

The planned income statement, at a 20% tax rate, with no equity securities gain assumed, so it equals the adjusted basis.

**depreciation of property and equipment**

Depreciation steps up again from the fourth quarter as new capacity enters service.

**stock-based compensation**

Compensation keeps growing with AI hiring.

**deferred income taxes**

A modest deferred tax benefit.

**accounts receivable**

Receivables build after the seasonal fourth-quarter peak.

**inventory**

TPU systems are built into inventory before billing.

**other assets**

Prepaid capacity and energy.

**accounts payable and accrued expenses**

Annual bonuses and first-quarter payables.

**income taxes payable**

Timing of tax payments.

**deferred revenue**

Cloud billings in advance.

**other operating items**

Other working capital movements.

##### Capital spending — model forecast

There is no company quarterly plan; $70 billion is my estimate for the first quarter of 2027, a little above the fourth quarter of 2026 because data center construction keeps ramping, allocated with the disclosed 65% servers and networking, 35% data centers split of technical infrastructure and a small Waymo and building remainder. These are my estimates of spending, not company guidance, and nothing is unallocated.

| servers and networking equipment | $43.4B |
| --- | --- |
| data centers | $23.1B |
| Waymo | $3.50B |
| Unallocated capital spending | $0 |
| Total capital spending | $70.0B |

**servers and networking equipment** My estimate, about 62% of a $70 billion quarter, with compute purchases still dominant.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate, about 33% of the quarter, for land, power and shells.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of Waymo and building spending.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “And next year, we expect it to significantly increase compared to 2026.” “We generated strong operating cash flow of $42.3 billion in the third quarter and $179.6 billion for the trailing 12 months.”

High about 1 chance in 10 of better

Q1-2027

**$150B** sales · +6% vs base

**$3.35** EPS · +14% vs base

**$70.2B** Capital spending

**−$11.7B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $58.5B |
| --- | --- |
| Less capital spending | −$70.2B |
| Free cash flow | −$11.7B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $41.1B |
| --- | --- |
| Depreciation of property and equipment | $11.2B |
| Stock-based compensation expense | $9.00B |
| Deferred income taxes | $1.50B |
| Bonus payments, inventory and receivables | −$4.00B |
| Operating cash flow | $58.8B |
| Less capital spending | −$70.0B |
| Free cash flow | −$11.2B |

**Net income**

High-case earnings of $3.28 a share plus the preferred dividend.

**Depreciation of property and equipment**

Faster deployment.

**Stock-based compensation expense**

Near the run rate.

**Deferred income taxes**

Higher profit.

**Bonus payments, inventory and receivables**

TPU deliveries release inventory.

##### Capital spending — model forecast

Faster spending ramp; my assumption. 5% is unallocated.

| servers and networking equipment | $43.2B |
| --- | --- |
| data centers | $23.3B |
| Unallocated capital spending | $3.50B |
| Total capital spending | $70.0B |

**servers and networking equipment** My assumption: 65% of 95% technical infrastructure.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** My assumption: 35% of technical infrastructure.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We continue to expect our CAPEX to increase significantly in 2027”

**GPT-6.1 Sol**

| Net income before preferred dividends | $44.7B |
| --- | --- |
| Depreciation | $11.0B |
| Stock-based compensation | $10.0B |
| Deferred income taxes | $2.00B |
| Accounts receivable | −$2.00B |
| Inventory | −$5.00B |
| Accrued expenses and other liabilities | −$5.00B |
| Accounts payable | $1.50B |
| Deferred revenue | $2.00B |
| Other operating assets | −$2.00B |
| Operating cash flow | $57.2B |
| Less capital spending | −$72.0B |
| Free cash flow | −$14.8B |

**Net income before preferred dividends**

High $3.55 earnings on 12.5 billion diluted shares plus $298 million preferred dividends; no assumed equity-security effect.

**Depreciation**

Installed-base depreciation remains high.

**Stock-based compensation**

Technical awards continue.

**Deferred income taxes**

Tax depreciation timing benefit.

**Accounts receivable**

Stronger deliveries add outstanding invoices.

**Inventory**

More volume requires replenishment despite better turnover.

**Accrued expenses and other liabilities**

Seasonal payments still exceed new operating accruals.

**Accounts payable**

Higher procurement partly funded by supplier credit.

**Deferred revenue**

Higher advance enterprise billings.

**Other operating assets**

Operating prepayments persist.

##### Capital spending — model forecast

My $72 billion quarterly spend is part of the $350 billion annual high investment case, not independent cash optimism. Other property is not precisely allocated. Acquisitions, financing and systems inventory are outside the capital-spending total.

| servers and networking equipment | $45.0B |
| --- | --- |
| data centers | $24.0B |
| Unallocated capital spending | $3.00B |
| Total capital spending | $72.0B |

**servers and networking equipment** My accelerated machine-delivery forecast in the high case.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate of faster project execution and payments.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $40.5B |
| --- | --- |
| Depreciation of property and equipment | $11.8B |
| Stock-based compensation expense | $9.70B |
| Deferred income taxes | $2.50B |
| Accounts receivable | −$4.50B |
| Inventory build for TPU system sales | −$4.00B |
| Other operating items | $1.00B |
| Operating cash flow | $57.0B |
| Less capital spending | −$65.0B |
| Free cash flow | −$8.00B |

**Net income (GAAP)**

Higher earnings on stronger revenue.

**Depreciation of property and equipment**

My forecast.

**Stock-based compensation expense**

My forecast.

**Deferred income taxes**

My assumption.

**Accounts receivable**

Faster collections.

**Inventory build for TPU system sales**

Faster deliveries.

**Other operating items**

My assumption.

##### Capital spending — model forecast

My assumption at a higher Q1 2027 capex with the same category shares.

| Servers and networking equipment | $39.0B |
| --- | --- |
| Data centers | $21.0B |
| Unallocated capital spending | $5.00B |
| Total capital spending | $65.0B |

**Servers and networking equipment** My allocation at a higher Q1 capex.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My allocation of the data-center share.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $42.7B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $22.0B |
| Working-capital and other operating movements | −$6.70B |
| Operating cash flow | $58.0B |
| Less capital spending | −$78.0B |
| Free cash flow | −$20.0B |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the high quarterly EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast depreciation and employee equity compensation on the expanding infrastructure base.

**Working-capital and other operating movements**

Forecast strong collections and deferred revenue, offset by first-quarter seasonal compensation payments and a larger systems-inventory build.

##### Capital spending — model forecast

The high case assumes accelerated investment to meet excess demand. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $45.6B |
| --- | --- |
| data centers | $24.6B |
| Unallocated capital spending | $7.80B |
| Total capital spending | $78.0B |

**servers and networking equipment** My high-demand allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not company guidance.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My high-demand allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not company guidance.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $44.2B |
| --- | --- |
| Depreciation of property and equipment | $11.3B |
| Stock-based compensation expense | $8.90B |
| Deferred income taxes and other non-cash adjustments | $1.40B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | $172M |
| Operating cash flow | $66.0B |
| Less capital spending | −$62.0B |
| Free cash flow | $4.00B |

**Net income**

High-case first quarter 2027 net income of 44.228 billion dollars equals 43.93 billion dollars of net income available to common stockholders (3.52 dollars per share across 12,480 million shares) plus 298 million dollars of preferred stock dividends.

**Depreciation of property and equipment**

Reflects 11.3 billion dollars of depreciation.

**Stock-based compensation expense**

Reflects 8.9 billion dollars of stock-based compensation expense.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.4 billion dollars of deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

Strong tensor processing unit system customer collections and first-quarter tax payment timing generate a 172 million dollar working capital inflow.

##### Capital spending — model forecast

In the high case, faster server deliveries bring first quarter 2027 capital spending to 62.0 billion dollars, with 60.45 billion dollars allocated to technical infrastructure and 1.55 billion dollars unallocated for office and corporate assets.

| servers and networking equipment | $39.3B |
| --- | --- |
| data centers | $21.1B |
| Unallocated capital spending | $1.55B |
| Total capital spending | $62.0B |

**servers and networking equipment** Allocates roughly 65 percent of technical infrastructure capital spending (39.3 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of technical infrastructure capital spending (21.15 billion dollars) to data centers.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**DeepSeek V4.1 Flash**

| net income | $40.0B |
| --- | --- |
| depreciation of property and equipment | $10.7B |
| stock-based compensation | $10.9B |
| deferred income taxes | $1.50B |
| accounts receivable | −$4.00B |
| inventory | −$3.50B |
| other assets | −$3.00B |
| accounts payable and accrued expenses | $2.00B |
| income taxes payable | $1.00B |
| deferred revenue | $500M |
| other operating items | −$2.10B |
| Operating cash flow | $54.0B |
| Less capital spending | −$74.0B |
| Free cash flow | −$20.0B |

**net income**

Stronger Cloud and advertising revenue, at a 20% tax rate and no equity securities gain.

**depreciation of property and equipment**

A larger asset base in service.

**stock-based compensation**

Faster hiring in AI and cloud.

**deferred income taxes**

A larger deferred tax benefit from faster capital spending.

**accounts receivable**

Receivables build after a strong fourth quarter.

**inventory**

A larger build of TPU systems.

**other assets**

Prepaid capacity and energy.

**accounts payable and accrued expenses**

First-quarter payables and bonuses.

**income taxes payable**

Timing of tax payments.

**deferred revenue**

Cloud billings in advance.

**other operating items**

Other working capital movements.

##### Capital spending — model forecast

In the strong case the first quarter of 2027 runs at $74 billion, my estimate, allocated with the disclosed 65% servers and networking, 35% data centers split of technical infrastructure and a Waymo and building remainder. These are my spending assumptions, not company guidance, and everything is allocated.

| servers and networking equipment | $45.9B |
| --- | --- |
| data centers | $24.4B |
| Waymo | $3.70B |
| Unallocated capital spending | $0 |
| Total capital spending | $74.0B |

**servers and networking equipment** My estimate, about 62% of a $74 billion quarter of strong compute buying.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate, about 33% of the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of Waymo and building spending.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “At the end of the third quarter, we had future purchase commitments of $924 billion and pre-commencement leases and other obligations of $152 billion.”

#### Three ways the high case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **The hardware ramp starts early in 2027.** The company always expected most chip-system revenue in 2027. Earlier deliveries lift Cloud sales and turn inventory into cash, but more capacity also means more spending: Q1-2027 high cash capex, average: $70.2B.
  Watch The fourth-quarter report describing deliveries ahead of plan.
  **Model reasoning**
  - **GPT-6.1 Sol** Faster Cloud backlog conversion and accelerator deliveries
  - **Kimi K3.1 Pro** Larger cloud systems ramp and quicker capacity additions
2. **Search keeps growing as AI ads go global.** Ads in AI Mode are being taken global for the first time. Search holds its pace into the new year, adding high-margin sales and lifting earnings.
  Watch Search growth steady at the fourth-quarter report.
  **Model reasoning**
  - **GLM 5.3** Search growth re-accelerating above 12 percent as AI-mode monetization scales globally
  - **Opus 5.5** Faster monetization of AI Mode ads
3. **Utilization and productivity offset rising costs.** The company reports large internal coding productivity gains and better chip price-performance. The margin stays at or above the base even as depreciation rises, so earnings grow faster than sales.
  Watch A steady Cloud margin after a full quarter of rented capacity.
  **Model reasoning**
  - **GPT-6.1 Sol** High computing utilization and stronger internal productivity
  - **Gemini 4 Argon** Superior operating leverage from custom eighth-generation tensor processing unit price-performance gains and internal Gemini 4 Carbon software engineering productivity, lifting operating margins above 34.5 percent

Sales near Q1-2027 sales high, average: $150B and earnings per share near Q1-2027 adjusted EPS high, average: $3.35 need the 2027 hardware ramp to start early, Search to keep its pace and Cloud margins to hold. Sol's high is furthest, Q1-2027 sales high, sol: $158B with earnings of Q1-2027 adjusted EPS high, sol: $3.55, because it alone already has Cloud surging in the first quarter and adds faster accelerator deliveries on top.

Cloud's backlog hit a record in the third quarter: We expect to recognize just over 55% of the total backlog as revenues over the next 24 months.

The six highs run from $144B (DeepSeek V4.1 Flash) to $158B (GPT-6.1 Sol).

First sign The fourth-quarter report, date not yet given: deliveries described as ahead of plan.

Low about 1 chance in 10 of worse

Q1-2027

**$133B** sales · −6% vs base

**$2.53** EPS · −14% vs base

**$60.3B** Capital spending

**−$15.5B** Free cash flow

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Operating cash flow | $44.9B |
| --- | --- |
| Less capital spending | −$60.3B |
| Free cash flow | −$15.5B |

Each model’s earnings-to-cash walk follows. Components retain that model’s labels and assumptions.

**Opus 5.5**

| Net income | $32.7B |
| --- | --- |
| Depreciation of property and equipment | $10.8B |
| Stock-based compensation expense | $9.00B |
| Deferred income taxes | $500M |
| Bonus payments, inventory and receivables | −$8.00B |
| Operating cash flow | $45.0B |
| Less capital spending | −$60.0B |
| Free cash flow | −$15.0B |

**Net income**

Low-case earnings of $2.60 a share on 12,450 million shares plus the preferred dividend.

**Depreciation of property and equipment**

Continued ramp.

**Stock-based compensation expense**

Near the recent run rate.

**Deferred income taxes**

Small.

**Bonus payments, inventory and receivables**

First-quarter bonus payouts plus TPU inventory.

##### Capital spending — model forecast

A slower start to 2027 spending; my assumption. 5% is unallocated.

| servers and networking equipment | $37.0B |
| --- | --- |
| data centers | $19.9B |
| Unallocated capital spending | $3.00B |
| Total capital spending | $60.0B |

**servers and networking equipment** My assumption: 65% of 95% technical infrastructure.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment”

**data centers** My assumption: 35% of technical infrastructure.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We continue to expect our CAPEX to increase significantly in 2027”

**GPT-6.1 Sol**

| Net income before preferred dividends | $29.7B |
| --- | --- |
| Depreciation | $11.0B |
| Stock-based compensation | $10.0B |
| Deferred income taxes | $2.00B |
| Inventory | −$7.00B |
| Accrued expenses and other liabilities | −$7.00B |
| Accounts payable | $500M |
| Deferred revenue | $500M |
| Other operating assets | −$2.50B |
| Operating cash flow | $37.2B |
| Less capital spending | −$62.0B |
| Free cash flow | −$24.8B |

**Net income before preferred dividends**

Low $2.35 earnings on 12.5 billion diluted shares plus $298 million preferred dividends; zero equity-security effects.

**Depreciation**

The installed infrastructure base continues expanding.

**Stock-based compensation**

Committed awards and technical compensation.

**Deferred income taxes**

Forecast capital deduction timing difference.

**Inventory**

Slower system deliveries extend the procurement-to-cash cycle.

**Accrued expenses and other liabilities**

Seasonal settlement of compensation and year-end operating accruals.

**Accounts payable**

Some operating supplier credit remains.

**Deferred revenue**

Modest advance billing.

**Other operating assets**

Operating prepayments and deposits increase.

##### Capital spending — model forecast

My $62 billion quarterly spend is a component of the $250 billion annual low case. It is not company guidance. Other-property allocations are unknown and are left unallocated. No net receivable or tax-working-capital change is assumed this quarter.

| servers and networking equipment | $36.0B |
| --- | --- |
| data centers | $23.0B |
| Unallocated capital spending | $3.00B |
| Total capital spending | $62.0B |

**servers and networking equipment** My slower first-quarter deployment estimate.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My forecast of construction commitments that continue despite weaker revenue.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**GLM 5.3**

| Net income (GAAP) | $32.0B |
| --- | --- |
| Depreciation of property and equipment | $11.2B |
| Stock-based compensation expense | $9.30B |
| Deferred income taxes | $1.50B |
| Accounts receivable | −$7.50B |
| Inventory build for TPU system sales | −$6.00B |
| Other operating items | $3.50B |
| Operating cash flow | $44.0B |
| Less capital spending | −$60.0B |
| Free cash flow | −$16.0B |

**Net income (GAAP)**

Lower earnings as growth slows.

**Depreciation of property and equipment**

My forecast.

**Stock-based compensation expense**

My forecast.

**Deferred income taxes**

My assumption.

**Accounts receivable**

Slower collections.

**Inventory build for TPU system sales**

Inventory keeps building while deliveries slip.

**Other operating items**

My assumption.

##### Capital spending — model forecast

My assumption at a lower Q1 2027 capex with the same category shares.

| Servers and networking equipment | $36.0B |
| --- | --- |
| Data centers | $19.5B |
| Unallocated capital spending | $4.50B |
| Total capital spending | $60.0B |

**Servers and networking equipment** My allocation at a lower Q1 capex.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**Data centers** My allocation of the data-center share.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**Kimi K3.1 Pro**

| Adjusted net income before preferred dividends | $30.9B |
| --- | --- |
| Depreciation, stock-based compensation, deferred taxes and other non-cash items | $18.0B |
| Working-capital and other operating movements | −$2.90B |
| Operating cash flow | $46.0B |
| Less capital spending | −$60.0B |
| Free cash flow | −$14.0B |

**Adjusted net income before preferred dividends**

Forecast earnings excluding equity-securities gains and losses, consistent with the low quarterly EPS case; preferred dividends are financing rather than operating cash flow.

**Depreciation, stock-based compensation, deferred taxes and other non-cash items**

Forecast depreciation and employee equity compensation on the expanding infrastructure base.

**Working-capital and other operating movements**

Forecast first-quarter seasonal compensation payments and systems inventory, partly offset by collections and deferred revenue.

##### Capital spending — model forecast

The low case assumes slower investment after weak demand. I allocate 90% using the latest technical-infrastructure mix and leave 10% unallocated for other assets and because no future disaggregated plan was disclosed.

| servers and networking equipment | $35.1B |
| --- | --- |
| data centers | $18.9B |
| Unallocated capital spending | $6.00B |
| Total capital spending | $60.0B |

**servers and networking equipment** My allocation assumes 90% of capital spending is technical infrastructure and 65% of that is this category; this is not company guidance.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My allocation assumes 90% of capital spending is technical infrastructure and 35% of that is data centers; this is not company guidance.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.”

**Gemini 4 Argon**

| Net income | $35.2B |
| --- | --- |
| Depreciation of property and equipment | $10.7B |
| Stock-based compensation expense | $8.70B |
| Deferred income taxes and other non-cash adjustments | $1.00B |
| Changes in accounts receivable, inventory, and other operating assets and liabilities | −$2.64B |
| Operating cash flow | $53.0B |
| Less capital spending | −$54.0B |
| Free cash flow | −$1.00B |

**Net income**

Low-case first quarter 2027 net income of 35.242 billion dollars equals 34.944 billion dollars of net income available to common stockholders (2.80 dollars per share across 12,480 million shares) plus 298 million dollars of preferred stock dividends.

**Depreciation of property and equipment**

Reflects 10.7 billion dollars of depreciation.

**Stock-based compensation expense**

Reflects 8.7 billion dollars of stock-based compensation expense.

**Deferred income taxes and other non-cash adjustments**

Reflects 1.0 billion dollars of deferred tax and amortization adjustments.

**Changes in accounts receivable, inventory, and other operating assets and liabilities**

Slower customer collections and continued inventory build result in a 2.642 billion dollar working capital outflow.

##### Capital spending — model forecast

In the low case, first quarter 2027 capital spending is 54.0 billion dollars, with 52.6 billion dollars allocated to technical infrastructure and 1.4 billion dollars unallocated for office and corporate assets.

| servers and networking equipment | $34.2B |
| --- | --- |
| data centers | $18.4B |
| Unallocated capital spending | $1.40B |
| Total capital spending | $54.0B |

**servers and networking equipment** Allocates roughly 65 percent of technical infrastructure capital spending (34.2 billion dollars) to servers and networking equipment.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** Allocates roughly 35 percent of technical infrastructure capital spending (18.4 billion dollars) to data centers.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.” “Moving to investments, our full-year 2026 CAPEX guidance range of $195 to $205 billion remain unchanged. We continue to expect our CAPEX to increase significantly in 2027, and we'll provide further details on our Q4 call.”

**DeepSeek V4.1 Flash**

| net income | $30.0B |
| --- | --- |
| depreciation of property and equipment | $10.5B |
| stock-based compensation | $10.5B |
| deferred income taxes | $1.00B |
| accounts receivable | −$3.00B |
| inventory | −$3.00B |
| other assets | −$2.00B |
| accounts payable and accrued expenses | $1.00B |
| income taxes payable | −$500M |
| deferred revenue | $500M |
| other operating items | −$1.00B |
| Operating cash flow | $44.0B |
| Less capital spending | −$66.0B |
| Free cash flow | −$22.0B |

**net income**

Weaker Cloud and advertising revenue at a 20% tax rate and no equity securities gain.

**depreciation of property and equipment**

Depreciation keeps stepping up each quarter.

**stock-based compensation**

Compensation keeps growing with AI hiring.

**deferred income taxes**

A small deferred tax benefit.

**accounts receivable**

Receivables build after the fourth-quarter peak.

**inventory**

Continued build of TPU systems ahead of delivery.

**other assets**

Prepaid capacity and energy.

**accounts payable and accrued expenses**

First-quarter payables and bonus accruals.

**income taxes payable**

Timing of tax payments.

**deferred revenue**

Cloud billings in advance.

**other operating items**

Other working capital movements.

##### Capital spending — model forecast

The company gives no quarterly plan; $66 billion is my estimate for a weak first quarter, allocated with the disclosed 65% servers and networking, 35% data centers split of technical infrastructure and a Waymo and building remainder. These are my spending assumptions, not company guidance, and everything is allocated.

| servers and networking equipment | $40.9B |
| --- | --- |
| data centers | $21.8B |
| Waymo | $3.30B |
| Unallocated capital spending | $0 |
| Total capital spending | $66.0B |

**servers and networking equipment** My estimate, about 62% of a $66 billion quarter of slowing compute purchases.

“Approximately 65% of our investments in technical infrastructure in Q3 was related to servers and networking equipment, which generally have useful lives of six years.”

**data centers** My estimate, about 33% of the quarter.

“The remaining 35% was for data centers, which have useful lives of seven to 40 years.”

**Waymo** My estimate of Waymo and building spending.

“There's some building and some Waymo, etc but the vast majority is technical infrastructure.” “We had negative free cash flow of $9.1 billion in the third quarter, driven by our investments in CapEx.”

#### Three ways the low case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Chip-system deliveries slip later into 2027.** Hardware revenue is booked when systems ship, and the company warns it fluctuates by quarter. A slip moves Cloud sales out of the quarter while inventory keeps building, so earnings and operating cash flow both fall. Spending stays near plan, deepening negative cash: Q1-2027 low cash fcf, average: −$15.5B.
  Watch Fourth-quarter commentary pushing system deliveries later, or inventory still rising at year end.
  **Model reasoning**
  - **GLM 5.3** TPU system revenue recognized later than planned, since shipments are lumpy and recognized when delivered
  - **GPT-6.1 Sol** Hardware deliveries or collections slip while inventory, depreciation and research costs keep rising.
2. **Advertising softens more than the usual post-holiday dip.** Advertisers' spending tracks the economy; Gemini points to expensive oil and borrowing. Search and YouTube fall more than the normal seasonal step, cutting high-margin sales almost directly from earnings.
  Watch Search growth slowing at the fourth-quarter report, or weaker consumer spending data early in 2027.
  **Model reasoning**
  - **Kimi K3.1 Pro** Slower advertising and subscription growth
  - **Gemini 4 Argon** Macroeconomic slowdown from elevated oil prices above 100 dollars per barrel and higher interest rates curtailing retail and brand advertising budgets across Search and YouTube
3. **Depreciation and rented capacity outrun sales.** New servers start depreciating at once, and the company rents third-party capacity while it builds. These costs rise whatever sales do, so the margin falls below the base and earnings drop more than sales.
  Watch A steeper depreciation outlook or a lower Cloud margin at the fourth-quarter report.
  **Model reasoning**
  - **Opus 5.5** Depreciation and third-party compute squeeze margins
  - **DeepSeek V4.1 Flash** Hardware cost of revenues and depreciation compressing operating margin

Sales near Q1-2027 sales low, average: $133B and earnings per share near Q1-2027 adjusted EPS low, average: $2.53 need chip deliveries to slip, advertising to soften after the holidays, and depreciation to keep rising regardless. DeepSeek's low is furthest, Q1-2027 sales low, deepseek: $128B, because it alone pairs a smaller Cloud ramp with margins diluted by hardware. Sol's earnings low, Q1-2027 adjusted EPS low, sol: $2.35, is deepest because it holds costs fixed while new and rented capacity earns less than expected.

The first quarter of 2026 already showed the seasonal pattern: Q1-2026 sales growth on the quarter before: −3.5%.

The six lows run from $128B (DeepSeek V4.1 Flash) to $136B (GPT-6.1 Sol).

First sign The fourth-quarter report, date not yet given: delayed system deliveries or a weaker margin outlook.

#### Watch

At the fourth-quarter report, date not yet given: how the company describes 2027 system deliveries, its 2027 spending plan, and the Cloud margin after rented capacity. Earlier deliveries point higher; delays or a larger depreciation step point lower.