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Alphabet reported third-quarter results on October 28, 2026, and its shares fell about 12% on October 29 after Google said AI Mode searches earn less than traditional searches. On the same day Google announced that ads in AI Mode are expanding to 10 more countries, including India, and that US users will see ads in follow-up questions.
Key facts
- Total Q3 revenue rose 25% to roughly $127.6 billion, according to The Next Web. The Register cites $125.8 billion, so the sources differ on the exact figure.
- Search revenue grew 12%, to about $63.3 billion, against 17% in Q2 and 19% in Q1.
- Net income was $26.17 billion, per The Register, compared with $35 billion a year earlier.
- Capital spending was $51.4 billion in Q3. Google kept its 2026 forecast of $195 billion to $205 billion and said it expects to spend significantly more in 2027.
- AI Mode ads are expanding to Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore, with Brazil, Mexico and the UK planned for Q4 2026.
What Google said about AI Mode
Chief business officer Philipp Schindler told investors that strong growth in AI Mode queries had an impact because of the lower monetization Google sees there. Ars Technica reports that he described fewer ads per query and said advertisers may need time to see the value of AI search ads.
Google's argument is that the gap will close. Schindler said many AI Mode queries sit at the top of the buying funnel and that most are incremental, which creates more chances to earn over time. Google's blog post, as relayed by 9to5Google, says click-through rates are already similar for sponsored and organic product listings in AI Mode. The company also says AI Mode queries are three times longer than traditional searches on average.
The sources disagree on why search growth slowed. The Next Web reports that executives pointed mainly to exchange rates, with a larger currency effect expected in Q4. Ars Technica and The Register tie the slowdown more closely to AI Mode's lower monetization.
The spending problem
The market reaction is about cost as much as ads. Ars Technica reports that free cash flow was negative for a second quarter, at -$9.06 billion, driven by AI infrastructure spending. The Register adds that Google lacks enough cloud capacity for all customers and has started moving some workloads to third parties, which it warned will pressure margins.
Cloud figures also differ between outlets. Ars Technica says Google Cloud crossed $30 billion in revenue, while The Register puts it at $24.75 billion. Both agree it is growing quickly, with Ars Technica saying revenue more than doubled over the year.
Analysts split on how to read the quarter. JPMorgan analysts, quoted by The Next Web via Bloomberg, said the results show the margin for error for a big AI spender. Rosenblatt's Scott Devitt said of the reaction: "I don't think it's a sea change."
What to watch next
The first test is how fast AI Mode ad revenue per query rises once ads reach more markets and multi-turn formats. Android Authority notes that the ads will be labeled Sponsored, and that a follow-up question such as narrowing laptops to a price cap could now trigger new ads.
