Alphabet Q3 growth highlights AI search monetization gap
Alphabet reported Q3 2026 revenue of $127.6 billion, up 25% year over year, while Google Cloud revenue rose 103% to $30.71 billion. Search advertising revenue increased 12% to about $63.4 billion but missed Wall Street expectations. On the earnings call, Chief Business Officer Philipp Schindler said AI Mode has lower monetization than traditional Search. Google said it was scaling ads in both AI Mode and AI Overviews, with AI Mode ads rolling out in 10 countries. The company planned additional AI Mode expansions, including Brazil, Mexico and the United Kingdom, in Q4 2026.
The results show strong growth in AI-related Search queries and Google Cloud alongside lower monetization in AI Mode, highlighting the tension between expanding AI usage and generating advertising revenue from it.
Google is bringing ads to AI Mode globally as it admits that the new take on Search brings “lower monetization,” all while $GOOG stock is seeing a fairly major drop.
Alphabet’s Q3 earnings call yesterday saw Google’s Philipp Schindler acknowledging that AI Mode, the company’s Gemini-powered new take on Search, has “lower monetization” compared to traditional Search. So the “strong growth” of AI Mode didn’t have as much of a positive impact on Google’s bottom line simply because the mode doesn’t generate as much revenue.
Schindler said:
…It’s worth noting that the strong growth in AI Mode queries had an impact because of the lower monetization we’re seeing in AI Mode. To be clear, we feel very good about our trajectory here. Our ad experiments have shown promising results and we’re now scaling ads within both AI Overviews and AI Mode to more users and more queries…
#Alphabet#Google#AI Mode#AI Overviews#Google Cloud#Gemini#TPU