Alphabet says lower AI Mode monetization weighed on Search growth

Alphabet said rapid growth in AI Mode queries weighed on Search growth because monetization was lower in that experience. The detail emerged during analyst questions, not in the company’s quarterly release.

Alphabet shares fell sharply in intraday trading Thursday after the results. Market reporting also connected the decline to weaker-than-expected search advertising growth, heavier cash use and concern about AI spending. Taken together, the available evidence does not establish lower AI Mode monetization as the selloff’s only cause.

The quarterly results had already shown revenue growth. Alphabet’s results filing put Google Search & other revenue at $63.35 billion, up 12% from a year earlier, while total Alphabet revenue rose 25% to $127.58 billion. The company also said year-over-year Search query growth was its strongest in five years.

The new detail came during the October 28 earnings call. Chief Business Officer Philipp Schindler said strong AI Mode query growth had an impact because Google was seeing lower monetization in AI Mode. He cited foreign exchange as the largest reason Search growth slowed from the second quarter, along with retail and media-and-entertainment dynamics.

Alphabet did not disclose AI Mode revenue, revenue per query, the size of the monetization gap or how much Search revenue was affected. Nor did the call explicitly identify conventional Search as the comparator, leaving a per-query comparison between AI Mode and standard search unestablished.

The results showed $42.29 billion in operating cash flow and $51.36 billion in quarterly purchases of property and equipment, implying about $9.1 billion of negative free cash flow under Alphabet’s stated non-GAAP measure. Schindler said Google was expanding ads in AI Overviews and AI Mode to more users, queries and international markets, including multi-turn ads in the United States. He described the company’s ad experiments as promising.