Google says AI Mode earns less than classic search, slowing Q3 revenue

Google's chief business officer told Wall Street this week that AI Mode queries earn less per answer than classic search. Duane Forrester reported the quote in Search Engine Journal on 5 November. He tied it to Alphabet's own Q3 numbers.

What the earnings call said

Search and other revenue grew 12 percent to $63.35 billion. That was down from 19 percent in Q1 and from 17 percent in Q2. Alphabet's revenue was about $1.6 billion below analyst estimates, which CNBC called the second straight quarter below estimates.

Philipp Schindler named four causes of the slowdown. Forrester lists them in order. A strong U.S. dollar came first. Second, Asia-Pacific retailers pulled back after the EU scrapped a low-value import exemption. Third, media and entertainment spend dropped back after a World Cup quarter. Fourth, AI Mode queries grew fast and earn less per query.

Schindler called the currency swing the single largest driver. He said AI Mode growth "had an impact because of the lower monetization we were seeing in AI Mode". CFO Anat Ashkenazi added that Alphabet is now lapping the search growth that began in Q3 2025. That makes year over year numbers harder to compare for a few more quarters.

Why one of these four is different

Forrester's point is that three of the four drivers are temporary. A currency swing reverses. A trade rule change gets priced into ad budgets within a few quarters. The World Cup is over. AI Mode is the only cause on the list that gets larger every quarter. Google is growing it. The lower earn rate comes with every query it adds.

Forrester states a disclosure in the article. His company measures brand visibility inside AI answers. A story about ad money moving into those answers is not neutral ground for him. The underlying numbers are from Alphabet's own earnings release and call, not from his data.

The market reaction

Alphabet shares fell about 13 percent the day of the earnings release. Forrester calls this the steepest one day drop on record and about half a trillion dollars in market value. He writes that search was one reason and not the only one. Free cash flow came in at negative $9.07 billion against an expected shortfall near $2.7 billion. Capital spending is still climbing.

Teams that spend on being named in AI answers now have a counted number. The effect on Google's own ad money is in its earnings release. A Google executive named AI Mode on Google's own call. Vendor click through studies and panel estimates come from sellers. An earnings line and a CBO quote do not. That changes the quality of the evidence behind a decision to move AI search work into a real line item.

Source

• Google Search Queries Hit A 5-Year High, And Search Revenue Didn't Follow, Search Engine Journal