Google Q3 Earnings: Search Revenue Share Falls Below 50% for First Time as Company Expands AI Ads Globally
Google reported that its classic search business accounted for less than half of total revenue for the first time in company history. Chief Business Officer Philipp Schindler acknowledged that the new 'AI Mode' generates less revenue than traditional search. To address this, Google announced plans to expand AI-mode advertising to countries including Australia, Canada, and Kenya. The stock fell 12%, wiping out approximately $500 billion in market value amid concerns over high AI capital expenditures and slowing ad growth.
In its third-quarter 2026 earnings report, US tech giant Google (Alphabet) disclosed that its classic search engine business accounted for less than 50% of total revenue for the first time in the company's history. Although search query volume saw its highest growth in five years, search advertising revenue grew by only 12% year-over-year, missing analyst expectations and showing a clear slowdown from the 17% growth recorded in the second quarter.
Google Chief Business Officer Philipp Schindler admitted during an analyst call that the new 'AI Mode' currently has lower monetization efficiency compared to traditional search results pages. He stated that advertisers might need more time to understand the advantages of ads within AI search. According to internal Google analysis, users find ads in AI mode more relevant and helpful than those on standard search results pages, though this data has not been independently verified.
To bridge the revenue gap caused by AI search, Google announced a global expansion plan. Beyond the US, Google will extend the display of ads in AI mode to countries such as Australia, Canada, Kenya, New Zealand, and Pakistan in the coming months, followed by Brazil, Mexico, and the UK. Additionally, Google plans to introduce 'multiturn ads' in the US, which dynamically switch displayed advertisements as user queries evolve within an AI search conversation.
Following the earnings release, Google's stock price plunged up to 12% on the Nasdaq, causing a momentary loss of approximately $500 billion in market capitalization. Market concerns are focused on two main areas: high capital expenditures for AI infrastructure continuing to pressure profit margins, and the lackluster growth of the core cash cow—search advertising—along with uncertainties regarding monetization during the transition to AI.