Alphabet shares fall 12% after Google says AI Mode searches earn less
By 9:35am in New York on Thursday, Alphabet had lost $511bn in market value, Julia Love and Davey Alba reported for Bloomberg. The shares were down more than 12%. It was the company’s biggest market value loss on record. A close more than 9.77% lower would be Alphabet’s worst reaction to results si
Alphabet and Google chief executive Sundar Pichai at the European Commission in Brussels in 2023
By 9:35am in New York on Thursday, Alphabet had lost $511bn in market value, Julia Love and Davey Alba reported for Bloomberg. The shares were down more than 12%. It was the company’s biggest market value loss on record.
A close more than 9.77% lower would be Alphabet’s worst reaction to results since its 2004 listing, CNBC reported. Microsoft, which reported on the same evening, was down about 1%.
Philipp Schindler, Google’s chief business officer, said on Wednesday’s earnings call that “the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode”.
Revenue from Google Search and other properties rose 12% to $63.35bn in the third quarter. That is according to Alphabet’s results release. Growth was 19% in the first quarter and 17% in the second. The figure came in below analysts’ estimates for a second quarter in a row, CNBC reported.
At the same time, Google said search queries grew at their fastest rate in five years. Paid clicks on search rose 8% from a year earlier, according to Alphabet’s quarterly filing. Bloomberg reported that paid clicks grew 13% in the second quarter.
Alphabet executives said exchange rates were the biggest factor behind the slower search growth, MacKenzie Sigalos reported for CNBC. They said the currency effect would be larger in the fourth quarter.
Total revenue rose 25% to $127.6bn, just short of forecasts, as Google Cloud doubled its sales. Heavy spending on AI data centres left free cash flow negative for a second quarter.
On the call, Schindler said Google is now scaling ads inside AI Overviews and AI Mode. Shashi Thakur, who runs search ads, set out the plan in a Google blog post.
Ads in AI Mode are now reaching 10 more countries. They are Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore. Google plans to add Brazil, Mexico and the UK in the fourth quarter. In the US, Google is adding ads to follow-up questions in AI Mode.
Google says click-through rates are already similar for sponsored and organic product listings in AI Mode. AI Mode queries are three times longer than traditional searches on average, Thakur wrote.
“On AI Mode, many of these queries are upper funnel queries, allowing us to capture new, high-value commercial intent,” Schindler said.
Chief executive Sundar Pichai compared the shift with Google’s move to mobile, Business Insider reported.
“Just like our shift to mobile over a decade ago, we are focused on building the best Search user experience, followed by monetization,” Pichai said.
Gil Luria, head of technology research at D.A. Davidson, wrote to CNBC in an email. Investors would worry that the misses in Search, YouTube and subscriptions showed “AI has finally come for Google”, he wrote. He added that he would not rush to conclusions based on one quarter.
JPMorgan analysts led by Doug Anmuth wrote that the results show “the margin for error” for a big AI spender. Bloomberg quoted the note.
Rosenblatt Securities analyst Scott Devitt took the other side on CNBC’s “Squawk on the Street”. He said Alphabet’s 4 billion search customers could become AI customers.
“I don’t think it’s a sea change,” Devitt said.
The fall also hit other AI stocks. On Thursday morning, Nasdaq futures fell after the results, and ServiceNow shares fell a record 25% after its own report.
Cristian Dina is the CRO at The Next Web. He has interviewed 300+ industry leaders and authored the book King of Networking, establishing hi (show all) Cristian Dina is the CRO at The Next Web. He has interviewed 300+ industry leaders and authored the book King of Networking, establishing himself as one of the most connected and respected voices in the ecosystem. At just 23 years old, Cristian was included in the Forbes 30 Under 30 2025 list, representing a new generation of tech builders, bold thinkers who move fast, build with purpose, and create real impact.
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