“We are now scaling high-quality ads within AI overviews in AI mode to more users and queries,” Philipp Schindler, Google’s chief business officer, said during the call with investors. The announcement came Wednesday during Alphabet’s third-quarter earnings call, marking a major change as Google brings ads in its AI-powered Search experiences to international markets while core search ad growth slows.
Alphabet Reports $127.6 Billion in Revenue as Search Ad Growth Slows
Alphabet announced $127.6 billion in revenue for the third quarter, a 25% increase compared to the same period last year. However, growth in Google’s core search advertising business continued to decelerate, putting added pressure on the company to turn its expanding artificial intelligence features into a meaningful source of revenue. Google Search revenue grew 12% year over year in the third quarter, dropping from 17% growth in the second quarter and 19% in the first quarter.
The advertising slowdown triggered a market reaction, with Alphabet shares falling 8% following the earnings release. Bringing in $96.3 billion in revenue, an 11% increase compared to the previous year, was Alphabet’s Google Services division, which encompasses Search. Meanwhile, Google Cloud provided a bright spot for the company, surging 103% to reach $30.7 billion in revenue.
Google Expands AI Mode Ads Globally Alongside Multi-Turn Ad Formats
To counteract slowing search growth, Google is expanding its monetization footprint globally for the first time. Philipp Schindler announced the international rollout of ads in AI mode during the earnings call, alongside the introduction of multi-turn ads and AI mode features in the United States. This expansion builds on Google’s May introduction of Gemini-powered ad formats, which included conversational discovery ads responding to user questions and sponsored recommendations embedded inside AI-generated answers.
According to Schindler, early results for the new ad formats show promise. Click-through rates for sponsored product listings in AI Mode are currently comparable to organic listings, and company user research indicates that consumers find the advertisements relevant. Google Cloud also experienced a busy period alongside these ad updates, highlighted by the release of Gemini 4 Argon, the growth of the Gemini app to one billion monthly users, and the launch of the Pixel 11 lineup.
Search Query Growth Hits Five-Year High Driven by AI Features
During the call with investors, Google CEO Sundar Pichai shared that the year-over-year expansion rate for Search queries reached a five-year peak, without revealing the exact percentage of increase. Pichai credited AI features with fundamentally altering how people interact with Search, noting that queries in AI Mode run three times longer on average than traditional searches. One in five AI Mode searches globally now involves voice, images, or documents, with Google processing more than 50 billion visual searches every month.
“People are using our AI features more, searching in entirely new ways,” Pichai said during the earnings call. The quarter also featured broad updates across Google’s ecosystem, including the expansion of the Gemini app to one billion monthly users and the release of the Pixel 11 device lineup.
Frequently Asked Questions About Google Search Ads and AI Mode
What drove the international expansion of AI Search ads?
Google expanded ads in AI mode internationally to capture new revenue streams as growth in its traditional search advertising business decelerated to 12% year over year in the third quarter.
How do performance metrics look for ads inside AI Mode?
Google reported that click-through rates for sponsored product listings in AI Mode are comparable to organic listings, and internal user research shows that consumers view the ads as relevant.
What were the exact financial results for Alphabet in the third quarter?
Alphabet reported $127.6 billion in total revenue, up 25% year over year. The Google Services division generated $96.3 billion, while Google Cloud revenue surged 103% to $30.7 billion.
Related reading