Google disclosed on its third-quarter 2026 earnings call that generative search in AI Mode is having some impact on its traditional search advertising business, as AI-generated summaries and answers reduce the commercial monetization potential of search results. Google Chief Business Officer Philipp Schindler said AI answers have changed how search results are presented, making the advertising business harder to monetize.
Financial data shows that Google's third-quarter search ad revenue reached $63.4 billion, up 12% year over year, but still about $1.6 billion below Wall Street expectations, and its growth rate also missed the 15% analysts had forecast. After the earnings report was released, Alphabet's stock fell as much as 13% during Thursday trading, wiping out more than $500 billion in market value and setting a record for the company's largest single-day market value loss.
At the same time, investment in AI infrastructure continues to climb. Google's third-quarter capital expenditures rose to $51.3 billion from $44.9 billion in the second quarter, and are expected to reach as much as $73 billion in the fourth quarter. Future commitments for data centers, energy, and related spending are reportedly more than $1 trillion. Google not only faces cost pressure from model training, compute, and infrastructure investment; the impact of AI search on traditional advertising revenue is also becoming more pronounced.
This situation reflects the real challenges facing the commercialization of generative AI: although AI features can change the user search experience, they may also disrupt existing traffic distribution and ad monetization models. How to build a sustainable profit mechanism while scaling AI applications is becoming a problem that Google and the entire AI industry need to solve.
