Google pushes ads into AI Mode as search growth slows
Alphabet's Q3 shows Cloud revenue up 103% and search up 12%. Google will expand ads in AI Mode globally, a worry for publishers that rely on clicks.
Google says it will bring ads to AI Mode, its conversational search feature, in markets outside the United States, MediaNama reported on 30 October after Alphabet's third-quarter results. The same results showed Google Cloud revenue more than doubling and search revenue growing a slower 12%. For publishers in India that depend on search clicks, the combination of more AI answers and more ads inside them is the part to watch.
What Alphabet reported
Alphabet's revenue for the quarter ended 30 September 2026 was $127.6 billion, up 25% from about $102.3 billion, TheDesk reports. Net income fell to $26.47 billion from $34.98 billion, which the article attributes mainly to an $8.66 billion loss on equity securities; MediaNama points to an unrealised loss on Google's SpaceX investment.
Search and other revenue was $63.35 billion, up 12%. Google Cloud revenue was $30.71 billion against $15.16 billion a year earlier, with operating income of $11.12 billion. Capital expenditure, the money spent on data centres and chips, was $51.36 billion, up 114%, and Alphabet's earlier guidance for 2026 is $195 billion to $205 billion. MediaNama adds that free cash flow was negative $9.1 billion, including a $5.2 billion EU fine payment.
What changes in search ads
MediaNama reports that Google will extend ads in AI Mode beyond the US, which Google executive Schindler called its first global push to earn money from the feature. In the US, ads will adapt over a conversation, and Google is also expanding ads in AI Overviews, the short summaries at the top of results. Google is also building checkout into search through a Universal Cart.
Why search growth slowed, and what is unknown
Google gave three causes, MediaNama reports: currency swings, the biggest factor; weaker retail advertisers in Asia-Pacific, hit by an EU customs change; and spending returning to normal after a strong World Cup quarter. Schindler also said more searches were moving to AI Mode, which currently earns less per query, though AI Mode users click sponsored and organic product listings at similar rates.
TheDesk does not mention AI Mode at all, and Alphabet does not appear to report AI Mode revenue separately, so how large the effect is cannot be measured from these reports. Pichai said query growth was the highest in five years, and that AI Mode queries are on average three times longer than traditional searches. Both outlets agree the Gemini app passed one billion monthly users. Shares fell after hours: MediaNama says about 10%, while TheDesk says as much as 7%, reflecting softer-than-expected ad results and rising AI costs.
The pressure on publishers
When an AI answer solves the question directly, fewer people click through to a website. MediaNama cites Info Edge, whose education platform Shiksha saw billings fall 27%, which the company attributed to AI-driven search. It also cites European publishers telling the European Commission that AI Mode sends fewer than 5% of queries to external websites. Google did not address traffic to outside sites on the call, and no analyst asked, the article says. Ads inside the AI answer could add to the pressure because users may never need to click further.
What it means for readers
For Indian publishers, marketplaces and startups that rely on organic search, the risk is that rankings matter less if the answer box takes the visit. Businesses may need to buy placement inside AI answers, which would make search a more paid channel. Advertisers get new formats, and the flow of money inside search may shift. Consumers will see more shopping features within search, which may be convenient but changes who is paid when they buy.
What to watch next
- Dates and markets for the AI Mode ad rollout outside the US, including India.
- Any reporting from Google on AI Mode revenue or clicks to publishers.
- Quarterly capex and Cloud margins, as investors weigh spending against returns.
Key takeaways
- Alphabet's Q3 revenue was $127.6 billion, up 25%, with Cloud up 103% to $30.71 billion.
- Search and other revenue grew 12% to $63.35 billion, slower than the previous quarter, per MediaNama.
- Google will expand ads in AI Mode beyond the US, per MediaNama's report of the earnings call.
- Publishers report sharp falls in referrals from AI answers, but Google gave no data on outside clicks.
- Reports differ on the size of the after-hours share drop, so read it as a range of 7 to 10%.
Sources
- [MediaNama: Google to expand AI Mode ads as search revenue growth slows](https://www.medianama.com/2026/10/223-google-expand-ai-mode-ads-search-revenue-growth-slows/)
- [TheDesk: Alphabet, Google and YouTube Q3 2026 earnings report](https://thedesk.net/2026/10/alphabet-google-youtube-q3-2026-earnings-report/)
Tags: Google AI search Alphabet AI Mode Digital advertising