Alphabet reported its Q3 results on 28 October, with search queries growing at their fastest annual rate in five years and total revenues nearing $127.6 billion, up 25% year-on-year. However, the company’s AI-driven search experiences are not yet generating ad revenue at the same rate as conventional search, despite a 12% increase in ‘Search & other’ revenues to $63.35 billion. Alphabet’s chief business officer Philipp Schindler told analysts that AI Mode’s limited monetisation contributed to the slowdown.
Search remains Google’s main financial driver and underpins its AI development costs. Wall Street reacted negatively, with Alphabet’s shares falling 12.6% on 29 October, erasing close to $500 billion in market value. Investors questioned the economics of Google’s AI transition, as analysts noted disappointment in revenue performance.
Google’s CEO Sundar Pichai said AI Mode queries are three times longer than traditional searches and involve more voice, image and document inputs. Despite this, the company faces rising traffic acquisition costs and only modest gains in other ad tech units. For regulated sector CMOs, the figures raise questions about the short-term business case for AI-driven advertising and the pace of monetisation.
