Google reports strong revenue but faces monetization challenges

Google's third-quarter results, covering July to September 2026, showed revenue nearing $128 billion and net income exceeding $26 billion. However, the company reported a drop in Alphabet stock price after disclosing that queries made in "AI Mode" generated less revenue than standard organic searches.

Advertising growth slows amid AI expansion

The growth of advertising revenue from Google Search and YouTube slowed, and investment spending reached $51.4 billion, resulting in negative free cash flow of $9.1 billion. Philipp Schindler, Google's head of operations, explained that the strong growth of "AI Mode" queries had an impact due to the low monetization observed in this mode.

AI drives search query growth but revenue lags

Sundar Pichai noted that investments in AI stimulated the overall growth of search queries, including commercial queries, and linked this growth to spending on AI. Google Cloud products exceeded expectations, surpassing the $30 billion revenue mark, while the Search revenue was described as "stable" in the third quarter by one source, and as "up 12%" by another.

Google expands AI Mode advertising efforts

Google indicated that it was expanding ads to more users and queries, planning to introduce "multi-turn" ads in the United States allowing ads to appear in subsequent "AI Mode" queries. According to a source, Google plans to expand high-quality ads integrated into "AI Mode" summaries to more users and queries.

Currency and AI Mode affect search activity

Schindler identified currency fluctuations as the "main factor" of the slowdown in search activity, while noting that the growth of "AI Mode" had also played a role due to lower monetization. The debate intensified regarding whether this transition was temporary or structural, with an analysis cautioning that conversational assistants could have a lasting impact on traditional search activity.

Google maintains annual revenue forecasts

Alphabet maintained its annual forecasts for the entire year, between $195 and $205 billion, while expecting investment spending to increase "significantly" in 2027. Google's offensive in the AI field has extended beyond search-related advertising, with the Gemini app reaching 1 billion users and Google Cloud's revenue increasing by 103% to $30.71 billion.

Monetization concerns persist

The issues related to the monetization of search remain at the center of concerns, with an analysis asking whether advertising and subscriptions could compensate for the value of searches absorbed by AI, while another highlighted that "AI Mode" currently generates less revenue per query than traditional search.

AI Overviews reduce click-through rates

A study by the Pew Research Center revealed that the addition of "AI Overviews" to Google Search had caused a significant decrease in the click-through rate in search results. The presence of these summaries indeed pushes users to end their sessions more quickly, which corroborates reports that AI is weighing on traffic and the economic model of websites.

AI challenges the traditional web model

These conclusions feed into a more alarming assessment of the future of the Web, with some observers suggesting that AI is killing the Web. Search engines used to direct users to websites producing content, but chatbots now directly respond based on this content, without necessarily redirecting to their creators.

Web publishers face declining traffic and revenue

Editors thus see their traffic and revenue decline, struggling to be compensated by AI companies for access to their content and facing a declining reliability of the Web, increasingly fueled by synthetic data generated by AI.