Google Reports Q3 Earnings: AI Mode Impacts Ad Revenue Growth

Google acknowledged that AI Mode’s lower ad monetization contributed to slower Q3 Search advertising revenue growth, even as AI drove more searches.

AI · Google's earnings report signals a significant industry trend where AI search features are beginning to impact ad monetization and revenue growth.

Google acknowledged that AI Mode’s lower ad monetization contributed to slower Q3 Search advertising revenue growth, even as AI drove more searches.

Google Search and other advertising revenue grew 12% to $63.3 billion. Google also reported its fastest year-over-year Search query growth in five years.

Why we care

More AI searches don’t necessarily mean more clicks or conversions for your brand or business. As more searches shift to AI Mode, you need to understand how they perform compared with traditional Search.

AI Mode’s lower monetization

Asked why Search revenue growth slowed despite more queries, Google Chief Business Officer Philipp Schindler acknowledged AI Mode’s impact:

“It’s worth noting that the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode,” Schindler said.
Schindler said foreign exchange was the biggest factor behind the slowdown from Q2. Changes in retail and media ad spending also contributed.
Google didn’t disclose how much less revenue AI Mode queries generate or how much they contributed to the slowdown.

AI Mode product ad clicks

“Click-through rates are already similar between sponsored and organic product list items within AI Mode,” Schindler said.

The comparison covers only product listings, not all organic links or citations in AI Mode.
Google didn’t share the actual click-through rates or explain how it measured them.

Search query growth hits five-year high

Google CEO Sundar Pichai said AI investments helped drive the company’s fastest year-over-year Search query growth in five years. That included growth in commercial searches.

AI Mode queries are, on average, three times longer than traditional searches.
One in five AI Mode searches globally uses voice, images, or documents.
Most AI Mode queries are incremental, Schindler said. But Google didn’t provide supporting figures.
Google didn’t disclose its total Search query volume or how much queries increased.

Other earnings highlights

Other news from Alphabet’s Q3 earnings call:

Discover ads: Google reported 18% more advertiser value and an 8% increase in user sentiment from AI-driven improvements in 2026.
AI-generated ad assets: Gemini models helped advertisers create more than 1.5 billion campaign assets in Q3, more than seven times the year-earlier total.
Search agents: Google plans to bring AI agents to Search that can book reservations, schedule appointments, fill out forms, and make purchases.
Gemini app: The app reached 1 billion users, Pichai said.
YouTube Shopping: More than 1.3 million channels are enrolled worldwide. U.S. creators can now tag Amazon products in videos, Shorts, and livestreams.