{"id":660421,"date":"2026-10-29T07:40:25","date_gmt":"2026-10-29T07:40:25","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/660421\/"},"modified":"2026-10-29T07:40:25","modified_gmt":"2026-10-29T07:40:25","slug":"google-struggling-to-make-ai-mode-searches-pay","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/660421\/","title":{"rendered":"Google struggling to make AI Mode searches pay"},"content":{"rendered":"

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\n ai and ml\n <\/p>\n

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\n That\u2019s a problem, cos it just spent $51 billion on infrastructure and still needs to rent compute from others to run its cloud\n <\/p>\n

Shares in Google\u2019s parent company Alphabet dived by almost ten percent on Wednesday, after the web giant admitted AI-powered searches earn it less money than it earns by serving ads with its old-school search engine.<\/p>\n

Alphabet on Wednesday reported its Q3 results, which included news that its year-over-year search query growth rate is the highest it\u2019s been in the last five years. Some of that growth comes from users adopting \u201cAI Mode\u201d \u2013 Google\u2019s latest LLM-powered search system.<\/p>\n

Google\u2019s revenue from search rose 12 percent year-over-year to $63.25 billion, a little lower than the 14.5 percent growth the company reported in last year\u2019s Q3.<\/p>\n

During Alphabet\u2019s earnings call, chief business officer Philipp Schindler said the slowdown was caused by \u201clower monetization we were seeing in AI Mode.\u201d<\/p>\n

That\u2019s a worry given that Google is spending enormous sums on infrastructure. $51.4 billion went out the door in Q3, around two thirds of it going towards servers and networking equipment. The rest funded datacenter builds.<\/p>\n

That spending appears to have impacted profitability, as Alphabet reported $26.17 billion net income for the quarter. Last year\u2019s Q3, during which Google revenue was $102.35 billion, produced $35 billion net income.<\/p>\n

Schindler argued that AI search will pay off.<\/p>\n

\u201cOn AI Mode, many of these queries are upper funnel queries, allowing us to capture new, high-value commercial intent,\u201d he told investors. \u201cIn addition, the majority of AI Mode queries are incremental, creating more monetization opportunities over time.\u201d<\/p>\n

Google tried to seize one of those opportunities today, by turning on ads alongside AI Mode searches around the world, after first testing them in the US only.<\/p>\n

But for now, AI Mode searches aren\u2019t as lucrative as Google\u2019s existing search business, which brought in just under half of Alphabet’s $125.8 billion quarterly revenue.<\/p>\n

Google\u2019s cloud is its next-best earner, at $24.75 billion for the quarter, but it has troubles too because the Big G doesn\u2019t have enough capacity to serve all its customers. The company has started to offload some customer workloads to third parties, and warned that will dent its future margins.<\/p>\n

Thomas Kurian, Google Cloud\u2019s CEO, said the company has over 100 companies using its TPU silicon, adding that \u201cAll of the inventory for TPU systems are associated with committed contracts\u201d \u2013 meaning Google can see some revenue to cover some capex. The company expects to book revenue from TPU sales to third parties in coming quarters.<\/p>\n

CEO Sundar Pichai was full of optimism for future AI revenue, noting that Google\u2019s Gemini app has won a billion users faster than any other product in the company\u2019s history, and praising the performance of its models. He said Google is moving fast to create agentic AI tools, but will focus on business customers for starters, \u201cbecause the bar for security, safety, and governance is extremely high.\u201d<\/p>\n

\u201cAs a next step, we are bringing these features to Search and also, of course, to our billion users on the Gemini app,\u201d he added.<\/p>\n

Pichai didn\u2019t say when agentic AI will come to search or if he expects it will avoid the monetization issues AI Mode has already caused.<\/p>\n

Yet the company also stuck to its $195-$205 billion capital expenditure forecast for this year and said it intends to spend \u201csignificantly\u201d more in 2027. \u00ae<\/p>\n","protected":false},"excerpt":{"rendered":"ai and ml That\u2019s a problem, cos it just spent $51 billion on infrastructure and still needs to…\n","protected":false},"author":2,"featured_media":660422,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[345,343,344,85,46,125],"class_list":["post-660421","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-il","tag-israel","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/660421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=660421"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/660421\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/660422"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=660421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=660421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=660421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}