Alphabet shares fall as AI search slows ad growth

Alphabet reported third-quarter results that missed Wall Street expectations, sending its shares down more than 10 percent in after-hours trading. The decline was driven mainly by slower advertising growth, even as cloud computing accelerated thanks to artificial intelligence.

Net income fell 25 percent year over year to $26.2 billion, weighed down by an $8.7 billion accounting charge tied mainly to SpaceX shares. Earnings per share came in at $2.12, well below the $3.02 analysts expected.

“On AI Mode, many of these queries are upper funnel queries, allowing us to capture new, high-value commercial intent.”

Revenue rose 25 percent to $127.6 billion, slightly short of the $128 billion forecast. Search revenue increased 12 percent to $63.25 billion, compared with 14.5 percent growth in last year’s third quarter.

Google’s advertising growth was limited to 11 percent, below the nearly 13 percent analysts had hoped for. The company said generative AI and autonomous AI agents could bypass its search engine and threaten its core ad business.

Alphabet spent $51.4 billion in the quarter, about two-thirds on servers and networking equipment. Cloud revenue reached $24.75 billion, but capacity constraints forced Google to shift some customer workloads to third parties, which may hurt future margins.

Google began showing ads alongside AI Mode searches worldwide after testing them in the United States. Chief business officer Philipp Schindler said AI Mode queries are mostly upper-funnel and incremental, creating more monetization opportunities over time.