Google admits AI search makes less money, but it's fixing that with more ads
Summary
Alphabet reported $128 billion in revenue and more than $26 billion in net income for the third quarter of 2026, while its share price fell nearly 12% after the results. Google said AI Mode searches earn less than standard web searches and announced plans to expand advertising in AI Mode as it increases investment in AI infrastructure.Key Facts
- Alphabet's third-quarter revenue rose 25% from a year earlier to almost $128 billion.
- Net income exceeded $26 billion, nearly $9 billion below the same quarter a year earlier.
- Alphabet reported earnings per share of $2.12, below analysts' consensus estimate of $3.02.
- Google Cloud revenue topped $30 billion, about $1 billion above analyst expectations.
- Google search volume grew 12% year over year, compared with 17% in the second quarter and 19% in the first quarter.
- Google Chief Business Officer Philipp Schindler said an AI Mode query currently earns less than a comparable standard web search because it carries fewer ads that cost less to run.
- Google plans to expand AI Mode ads in more countries and introduce ads that change during conversations in the United States.
- Alphabet reported $51.4 billion in third-quarter capital spending and forecast total spending of $195 billion to $205 billion in 2026; it is targeting more than $300 billion in AI investment in 2027.
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