News · Brederode S.A.
Brederode: Alphabet loses more than 12% after a quarter in which its free cash flow fell below zero
A share's value depends on the cash it will return over time. In the third quarter, Brederode's largest listed holding produced less of it, issued shares instead of buying them back, and still expects sharply higher investment in 2027.
On the evening of 28 October, Alphabet published operating income up 30%, at $40.6bn, and free cash flow of −$9.1bn. The next day, its share price lost more than 12%. For Brederode, whose largest listed holding it was at 30 June, at €274.01m, what matters is the cash each share will produce, and when.
At 30 June 2026, Brederode held 883,611 Alphabet Class C shares, valued at €274.01m, 6.05% of its net asset value (Opulion calculation, Brederode half-year release, p. 1 and 14). Our analysis of 4 September read, in two electricity agreements, how Alphabet is securing the power for its future data centres. The quarter now shows what this infrastructure costs, and how it is financed.
Operating income rises, cash falls
Three measures say three different things. Operating income measures what the businesses earn after their costs, including the depreciation of servers and data centres already in service. It rises: $40.6bn against $31.2bn, driven by Google Cloud, whose revenues double to $30.7bn (+103%). Free cash flow measures something else: the cash produced by the businesses during the quarter, called operating cash flow, less the investments paid in the same quarter, counted in full on the day they are paid. It falls below zero, because Alphabet spent $51.4bn on property and equipment, more than its $42.3bn of operating cash flow. It is the second negative quarter in a row, after $24.6bn in the fourth quarter of 2025, $10.1bn in the first quarter of 2026 and −$5.9bn in the second. Over twelve months, free cash flow stays positive, at $19.7bn (p. 8). Its chief financial officer also cites the build-up of inventory of TPU systems intended for sale, sets of chips, networking and software designed for artificial intelligence, and the payment of $5.2bn for a 2018 European Commission fine.
Net income, the third measure, adds financial items to operating income, such as interest and gains or losses on investments, then deducts tax. Net income attributable to common shareholders falls 25%, to $26.2bn (Opulion calculation: 26,170 / 34,979 − 1, p. 5). The cause lies outside operations: an $8.7bn loss on equity securities (p. 8). According to the chief financial officer, other income and expense, negative at $8.2bn, is mainly explained by an unrealised loss on Alphabet's investment in SpaceX, Scottish Mortgage's largest holding, whose plan to rent $40bn of GPUs our brief of 27 October put in figures. Alphabet puts the effect of the loss at $0.55 per share (p. 8). Without it, earnings per share would have been $2.67 instead of $2.12 (Opulion calculation: 2.12 + 0.55), against $2.87 a year earlier, a quarter that itself included a $10.7bn gain on equity securities. An unrealised loss remains an accounting entry, free cash flow is counted in cash.
What the market pays for: cash, per share, over time
A share price reflects what investors expect to receive, per share, over many years: dividends, buybacks, or cash left in the company to grow. Per diluted share, the quarter's free cash flow went from $2.00 to −$0.73 in a year (Opulion calculation: 24,461 / 12,203 then −9,065 / 12,368, p. 5 and 6). The quarter moved three levers at once.
Today's cash first: it is negative. Tomorrow's cash next: according to the chief financial officer, Alphabet maintains investment of $195bn to $205bn for 2026, and spent $132.0bn of it in nine months (p. 6). That leaves $63.0bn to $73.0bn for the fourth quarter, more than the third quarter's $51.4bn (Opulion calculation: 195 − 132.0 and 205 − 132.0). For 2027, she continues to expect this investment to "increase significantly", and refers the details to the fourth-quarter analyst call. The share count, the third lever: 12,294 million at 30 September, 206 million more than at 31 December 2025, i.e. +1.7% (Opulion calculation: 12,294 / 12,088 − 1, p. 4). Alphabet bought back no shares in nine months, against $39.8bn a year earlier. It issued $42.9bn of common stock (p. 6), notably through an at-the-market programme of sales spread over trading sessions (p. 2), as well as $19.1bn of preferred stock that will become common stock (p. 4 and 6).
Alphabet does not comment on its share price. Its chief financial officer says she expects a return on invested capital well above the cost of capital, without putting a figure on it. Opulion reading: each of the three levers pushes back or dilutes cash per share, while the return on the data centres is still to come. On this reading, the fall of more than 12% revises the price paid for each dollar of operating income, because that dollar turns into cash for shareholders later, and less surely. The financial press also points to slower than expected search growth (Yahoo Finance) and the scale of the investment (Seoul Economic Daily).
Today's engine slows, tomorrow's costs money
Search, the group's largest source of revenue, grows 12%, to $63.3bn out of $127.6bn, according to the chief financial officer. The chief business officer cites the currency effect first, as the main factor in the slowdown compared with the second quarter, then links another part to lower monetisation of queries asked in "AI Mode", Google's conversational search mode. The chief financial officer warns that the comparison with last year's acceleration will weigh on growth again in the fourth quarter. Google Cloud doubles, but makes up 24.1% of revenues (Opulion calculation: 30.7 out of $127.6bn). According to the chief financial officer, the vast majority of the quarter's investment goes to technical infrastructure, to support the group's investment in artificial intelligence. Opulion reading: the relay exists, and it remains about half the size of the engine it has to take over from ($30.7bn against $63.3bn).
Google Cloud
$30.7bn of revenues in the third quarter, 24.1% of the total.
Cash per share
The quarter's free cash flow per diluted share, against $2.00 a year earlier, for 206 million more shares in nine months.
The return on investment
Spent in nine months, $195bn to $205bn expected for the year, a "significant" increase expected in 2027.
What it means for Brederode
Brederode holds Alphabet as a financial shareholder. What comes back to it is the value of its 883,611 shares and a quarterly dividend of $0.22 per share, payable on 14 December to shareholders of record on 7 December (p. 2). It would bring Brederode about $0.19m gross if it still held its shares on that date (Opulion calculation: 883,611 × $0.22). The return on the holding rests first on value per share. In the first half, the holding gained €38.03m in value (half-year release, p. 14). As a yardstick of scale, a 12% fall in the holding would represent about €33m at its value of 30 June (Opulion calculation: 12% × €274.01m), or about 0.7% of Brederode's net asset value and €1.1 per share, out of the €154.64 published at 30 June (Opulion calculation: 6.05% × 12%, then × €154.64). This is a sensitivity, not a measurement: the actual value of the holding depends on the share price and the dollar since 30 June, and Brederode's next published value will be that of 30 September.
Opulion reading: for Brederode shareholders, the largest listed holding remains a growth company, which for now raises more capital than it returns. The fall of 29 October can be read as the price of that change.
The next tests
On 10 December, Brederode's interim statement, listed in its financial calendar, should give the value of the Alphabet holding at 30 September, before the session of 29 October. Alphabet's fourth-quarter analyst call, on a date still to be announced, should detail 2027 investment, as the chief financial officer has said, and will show whether free cash flow moves back above zero. The last test will take longer: the revenues these data centres generate, which alone will show whether a slightly smaller share of Alphabet is worth more to Brederode.
How we counted
Alphabet's figures come from its release of 28 October 2026 on the third quarter (pages cited). The remarks of the chief financial officer, Anat Ashkenazi, and the chief business officer, Philipp Schindler, come from the unofficial transcript of the analyst call of 28 October published by The Motley Fool. Brederode's figures come from its half-year release of 10 September 2026, p. 1 and 14. The share price fall of 29 October, more than 12% according to Seoul Economic Daily and Yahoo Finance, is used only as an order of magnitude. Ratios and percentages marked "Opulion calculation" are ours.
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