Google's AI Mode Makes Less Money. So It Gets More Ads

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On October 28, Alphabet reported its third quarter. Revenue up 25 percent. Cloud more than doubled.

The next day, the stock fell about 13 percent. Its worst day since Google went public in 2004. Roughly half a trillion dollars in market value.

One of the reasons is a single sentence on the earnings call. About AI Mode.

Numbers

Alphabet made $127.6 billion in revenue in the quarter. Google Cloud: $30.7 billion, up 103 percent.

Search brought in $63.4 billion, up 12 percent. When I asked if Google is in trouble in August, search was growing 17 percent.

And the spending... $51.4 billion for data centers and chips. In one quarter.

Alphabet spent $9.1 billion more cash than it brought in. The second quarter in a row.

AI Mode

On the call, an analyst asked why search slowed down. Google's chief business officer named currency effects first, "the single largest driver." Then a few effects in single industries.

And then this:

"…the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode."

In plain words: people use AI Mode a lot. And AI Mode earns Google less per search than the classic results page.

He added: "we feel very good about our trajectory here."

AI Mode answers with a full text instead of ten links. Queries there are three times longer on average, Google says. Fewer places for ads, I guess. At least so far.

More ads

The fix came out the same day...

Google is scaling ads inside AI Mode to ten more countries, from Australia and Canada to India and Singapore. Brazil, Mexico, and the UK follow in the fourth quarter.

In the US, ads now also show up in follow-up questions inside AI Mode. Labeled "Sponsored."

Google says people click those sponsored product listings about as often as the organic ones next to them. Internal data, of course.

And advertisers can't opt out of these AI placements. Their ads can end up there either way.

Not in the EU, though. AI Mode has been available in Germany since October 2025. But ads inside it? None announced. A year ago, Google said it had "not disclosed any plans to bring ads in AI Mode to the EU."

I am in Germany. So for me, nothing changes inside AI Mode right now.

Clicks

Google Search is still my biggest traffic source. SEO beats every social feed I have tried.

On the call, Google didn't say a word about websites or clicks. As far as I can see.

Other numbers do. Chartbeat measured 40 percent fewer visits from Google Search to publishers, July 2026 compared to a year earlier. Mostly news sites. And Chartbeat doesn't say it's all AI.

If ads in the AI answer get clicked about as often as the links, the links have more competition. And they sit further down. That's my guess.

To be fair

Currency was the biggest reason for the slowdown. Google said so first, AI Mode came third.

The negative cash flow has one-time parts too. Among them a $5.2 billion payment for an old EU fine from 2018.

Search still grew. 12 percent of a very big number is a lot of money.

And Google says most AI Mode queries are new ones, searches people wouldn't have done before. More searches, more chances for ads later.

The Bottom Line

A lot of the time, I take the AI summary at the top and never scroll further. Many of us do.

Now that summary gets ads. And the links below it get a little further away.

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