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Google Admits AI Search Hurts Profits
29 Oct
Summary
- Google's stock dropped 10% after AI query monetization concerns.
- Search revenue growth stalled, missing analyst expectations.
- High capital spending pushed Alphabet's free cash flow negative.
Alphabet's stock plummeted nearly 10% in after-hours trading, settling at $292.50. This significant decline followed comments from Chief Business Officer Philipp Schindler acknowledging that queries from AI Mode carry lower monetization compared to traditional search queries. This admission surfaced during the October 28, 2026 earnings call when analysts questioned the disconnect between faster query growth and stagnant Search revenue.
Search revenue for the quarter was reported at $63.35 billion, showing little improvement from the previous quarter and falling short of the $64.85 billion analysts had predicted. Schindler attributed some of the Search deceleration to factors beyond AI, including foreign exchange impacts and reduced spending from advertisers in Asia-Pacific and media sectors. However, the core issue highlighted was the current lower revenue generation from AI-driven search results.
Adding to financial concerns, Alphabet's capital spending reached $51.355 billion. This substantial investment resulted in the company's free cash flow turning negative, which could leave the company with limited flexibility should Search revenue continue to weaken. The company is actively working to improve monetization within its AI Mode queries.
