Alphabet Inc.’s Google search revenue growth decelerated significantly in the third quarter of 2026 despite recording its fastest query growth in five years, driven partly by lower monetization from its AI Mode.
The slowdown in Google’s core advertising business led to Alphabet shares plummeting approximately 13 percent on Thursday, marking the steepest one-day decline on record and erasing roughly half a trillion dollars in market value.
Search and other revenue increased 12 percent to $63.35 billion for the quarter, falling short of analyst expectations by about $1.6 billion, according to company reports.
Philipp Schindler, Google’s chief business officer, attributed the revenue slowdown partly to a strong increase in AI Mode queries, which currently have lower monetization rates compared to traditional search.
The company indicated that this lower monetization from AI Mode is a structural factor impacting revenue, with its effect expected to widen as adoption increases.
Other temporary factors also contributed to the slower revenue growth, including unfavorable foreign exchange rates and reduced spending from Asia-Pacific retail advertisers, according to Alphabet.
Additionally, the normalization of media and entertainment spending following the FIFA World Cup and difficult year-over-year comparisons further impacted the results.
Analysts at CNBC noted the unprecedented stock drop following the earnings announcement, highlighting investor concerns over the future profitability of Google’s search business.
The company’s executives, including CEO Sundar Pichai, have emphasized the strategic importance of AI integration across Google’s products, despite the immediate revenue implications.
The earnings report raised questions among investors about Google’s future monetization strategies for its rapidly expanding AI-driven search features.
Source: Search Engine Journal
