Alphabet announced for the third quarter 2026 revenue of $63.35 billion for its Google Search & Other line, up 12 % year over year. Search revenues have been slowing for two quarters, and according to commercial activities director Philipp Schindler, the lower monetization of AI Mode, Google’s AI‑based search mode, is one of three reasons for this slowdown.
Why growth is slowing
Search revenue growth was 19 % in the first quarter and 17 % in the second. In the third quarter, those revenues were essentially flat compared with $63.27 billion in the prior quarter. According to Philipp Schindler, the most important factor is currency movements. Retail also felt an impact, with some advertisers in the Asia‑Pacific region affected by the European Union’s removal of the duty‑exemption for low‑value imports. The media and entertainment sector, meanwhile, saw its spending return to normal after a strong second quarter, marked by the FIFA World Cup.
Chief financial officer Anat Ashkenazi said that the currency effect weighed little on annual growth, but more on quarterly growth. She also mentioned a tougher comparison base, with search growth having continued to accelerate throughout the second half of 2025.
Monetization of AI Mode at the heart of the debate
During the earnings presentation, chief executive Sundar Pichai said that AI investments have driven query growth, including commercial queries. He noted that “the annual query growth rate is the highest in five years.” When asked by analyst Doug Anmuth of J.P. Morgan about the gap between query growth and advertising revenue growth, Philipp Schindler cited currency, retail and media, then the strong query growth in AI Mode, which weighed on revenue because of lower monetization. He did not specify relative to what level this monetization was lower, nor the amount involved.
In his prepared remarks, Philipp Schindler explained that many new questions asked in AI‑assisted search fall in the early stage of the purchase journey, and that most queries in AI Mode are incremental, which, he said, opens more monetization opportunities over time. Shashi Thakur, vice president and general manager of Google Search ads and Google ad experiences, wrote in the announcement post: “Our research shows that people are comfortable with ads in AI Mode and find them highly relevant.” He adds that “click‑through rates are already similar between sponsored items and organic results in AI Mode.” A footnote refers to internal Google data from the United States covering the period August 20 to September 3 2026.
Google also announced the extension of ads in AI Mode to ten additional countries: Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore. The group is also launching ads on follow‑up questions in AI Mode in the United States, to which all existing Search, Shopping and Performance Max campaigns are eligible by default, with no option to exclude them separately.
Outlook for the fourth quarter
Anat Ashkenazi expects a slightly more unfavorable currency effect for the fourth quarter, especially on Search and YouTube ads, at current spot exchange rates. She also estimates that the continuation of last year’s acceleration will weigh on growth. Google also plans to expand its ads in AI Mode to other countries in Q4 2026, notably Brazil, Mexico and the United Kingdom.
