Search queries are expanding at their fastest charge in five years, Google genitor Alphabet stated in its earnings study final week. However, Google’s Search income growth slowed to 12 percent twelvemonth complete twelvemonth in the third quarter, downward from approximately 17 percent in the former quarter. Meanwhile, growth in paid clicks — clicks on ads that create income for Google — slowed from 13 percent to 8 percent.
That’s motionless significant growth, but not the direction investors were expecting for from a business preparedness to expend concerning $200 milliard this twelvemonth on infrastructure, mostly to assistance AI. Alphabet shares have fallen concerning 14 percent since it reported earnings final week, as investors inquiry the expenses and returns of the company’s AI ambitions.
“This is the archetypal important disruption that Google is facing to its center endeavor in decades.”
Chief Business Officer Philipp Schindler stated prosperity effects were the biggest controller of the revenue-growth slowdown, alongside changes in spending by advertisers in particular industries. But Google’s AI makeover additionally contributed to the slowdown: AI Mode queries were expanding powerfully but monetizing at a lesser charge than traditional searches, Schindler says. He added that Google feels fine concerning its trajectory and that its “ad experiments have shown promising results.”
It remains unclear whether that reflects a deliberate rollout of ads, as Google says, or a additional essential issue alongside promotion in AI search.
YOY growth for hunt income vs. paid clicks in Q1-3 in 2026
“This is the archetypal important disruption that Google is facing to its center endeavor in decades,” Nate Elliott, an eMarketer chief expert covering AI and advertising, tells The Verge. AI is changing how group discover data — and whether they click on the ads that prosperity Google’s business.
What Google’s center Search endeavor looks akin increasingly depends on what you ask. In many cases, AI Overviews add generated summaries to hunt results; electing AI Mode turns searching into a conversation. But person searching for Nikes can motionless get acquainted buying listings and content ads, says Andy Taylor, vice chairman of investigation at digital promotion agency Tinuiti. They’re looking to buy shoes fairly than get an AI clarification of them.
Google’s disagreement is that AI is expanding the business. Schindler says most AI Mode queries are “incremental” — additional questions fairly than replacements for existing searches. Many are additionally “upper-funnel,” definition group are researching possible purchases before they cognize what they want. The business sees those searches as opportunities to market additional ads complete time.
Google is currently expanding ads in AI Overviews and AI Mode, including internationally and throughout multiple turns of US AI Mode conversations. It has additionally floated bringing ads to its standalone Gemini app, saying formats developed for AI Mode could transport over, but hasn’t announced when.
The item is, Google, as fine as competitors akin OpenAI, are motionless figuring out how to create ads activity in AI — the two delivering results for advertisers and avoiding alienating the group using their AI tools.
For now, advertisers are motionless getting results from Google. Tinuiti’s same-store advertisers risen their Google paid hunt spending 14 percent twelvemonth complete twelvemonth in the third fourth during maintaining their return-on-ad-spend targets.
“If group are clicking through small often. That is a difficulty that they need to fig out.”
“We’re motionless seeing a fine return, and we’re not seeing achievement obtain a hit,” Taylor says.
The capture is that advertisers can’t isolate how Google’s AI ads are doing. Google doesn’t let them separately mark that inventory or interrupt out its performance, Taylor says. Steady general returns could average AI ad traffic is motionless too small to noticeably power the results, or that it performs likewise to existing inventory. Taylor suspects it’s mostly the former.
That leaves an crucial inquiry unanswered: How much volition AI add to Google’s promotion business, and how much could it replace? Additional queries could bring in new income equal if all earns small than a traditional search. The hazard is that AI Mode additionally draws group distant from searches that Google monetizes additional effectively. Google’s assertion that most AI Mode queries are additional doesn’t inform us how much income it could endure from the searches AI Mode replaces.
“If group are clicking through small often,” Elliott says, “that is a difficulty that they need to fig out.”
The commitment of conversational promotion is that group portion much additional concerning their needs than they would in a few keywords. But platforms motionless have to acknowledge which parts of a conversation matter and equivalent them alongside the correct ads.
“It’s not a slam dunk that it’s going to rotate into additional productive advertising,” Elliott says.
An first study of ChatGPT ads suggests richer conversations don’t automatically translate into additional retailing sales. An October working paper established that US visits from ChatGPT ads generated 64 percent small income for retailers per meeting than visits from Google Search ads: $0.89 versus $2.45. The operating document measures retailers’ revenue fairly than phase revenue, and its findings concerning ChatGPT don’t established how Google’s own AI ads perform.
Taylor cautions that those comparisons depend on what group are searching for. Someone searching Google for Nike shoes may already be prepared to buy, during person asking an AI tool which operating shoes to choose is motionless researching. A higher revenue come back could indicate that difference in acquisition intent fairly than additional productive ads.
Google’s existing endeavor has stated it area to obtain its period alongside AI ads, Taylor says. He points to its prosperous change to mobile: Early phone traffic was small precious to advertisers since buying on a phone was cumbersome, but that changed.
Elliott cautions that finding productive ad formats can obtain years. Search engines started alongside banner ads before adopting paid listings; social media went through its own experimentation. Today’s formats may not be the ones that ultimately work.
But Google’s mounting AI spending raises the stakes. Search income is motionless expanding by twice digits, but the business has yet to display how fine its new way of searching can pay.
“They entirely do not have it all figured out,” Elliott says. “No one has it all figured out.”
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