Google blames lower AI Mode monetisation for slowing Search growth
Alphabet's Google Search & Other revenue rose 12% year on year to $63.35 billion in Q3 2026, down from 19% growth in Q1 and 17% in Q2, and essentially flat on the previous quarter's $63.27 billion. On the earnings call, Chief Business Officer Philipp Schindler gave lower monetisation within AI Mode as one of three reasons for the slowdown, alongside currency movements and retail softness.
Schindler said AI Mode query growth is strong but earns less per query than traditional Search, without saying what the comparison is or how much revenue it costs. CEO Sundar Pichai said AI investment has lifted query growth, including commercial queries, to its highest year-on-year rate in five years. Schindler framed the trade-off as deliberate, comparing it to the shift to mobile: build the best experience first, monetise after.
Google is expanding ads in AI Mode to ten more markets, including Australia, Canada, India and Singapore, and is launching ads in follow-up questions in the US. Existing Search, Shopping and Performance Max campaigns are eligible by default and cannot opt out separately. Advertisers also cannot target AI Mode or AI Overviews directly, and AI explainers attached to placements are generated by Gemini without advertiser approval or opt-out.
For brands chasing citations in AI answers, the quarter shows Google scaling ad inventory inside AI Mode faster than it is proving that inventory converts. Google reported no figure for clicks sent to websites, after saying in Q2 that AI features send billions of clicks a week. Further expansion is planned for Q4 in Brazil, Mexico and the UK.
Reported by Search Engine Journal ↗
Topics: AI Mode, Google Search, AI advertising