Google parent company Alphabet released its third-quarter financial results Wednesday afternoon, showing a healthy increase in revenue for the months of July through September. But the company’s stock price took a hit, marking one of the biggest post-earnings declines in its history. It boils down to several troubling aspects of the new report, including the company’s admission that AI search doesn’t earn as much as organic search, and despite this, Google expects to spend even more on AI next year.
The company raked in nearly $128 billion in the third quarter of 2026, generating more than $26 billion in net income. These numbers may look good, but financial markets are not impressed. While revenue was up 25 percent from last year, net profit was nearly $9 billion lower. At the time of publishing this article, the stock price was down almost 12 percent, and it was down about 13 percent earlier today.
While revenue grew 25% year over year, analysts were expecting more. Google reported earnings per share of $2.12, but the consensus forecast Wednesday was $3.02. Google’s cloud products have exceeded expectations, with revenue exceeding $30 billion. That’s about a billion more than analysts think.
Google still makes a ton of money, but several troubling trends are emerging. The company’s recent years have been all about AI, with generative technology appearing in products ranging from Gmail to Android. Most notably, Google is moving to an AI search platform powered by Gemini models.
During the earnings conference call, Chief Commercial Officer Philipp Schindler discussed the company’s search volume. This is one of the key metrics by which Google tracks its own performance. In the last quarter, Google saw its searches increase by 12% compared to last year. It’s good for the company, right? Except that it’s a much slower pace than previous quarters. Growth in the second quarter was 17% and the first quarter saw growth of 19% compared to 2025. Search revenue also remained stable in the third quarter.
So that’s the first problem, probably due to more consumers using AI chatbots to find answers. The other problem is that Google’s approach to AI search doesn’t yet generate revenue like standard web search. According to Schindler, each AI query generates less revenue than a similar web search: there are fewer ads and it costs less to serve them.
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