Google expands AI search ads globally as revenue growth slows

Google announced it is expanding ads in its AI-powered Search experiences to international markets for the first time. The company stated that ads in AI mode are being scaled to more users and queries globally. This expansion follows a period where the feature was tested only in the United States. Google’s chief business officer Philipp Schindler noted that click-through rates for sponsored product listings in AI Mode are comparable to those for organic listings. The move comes as Google Search advertising growth decelerated to 12% year over year in the third quarter.

Alphabet reported $127.6 billion in revenue for the third quarter, up 25% year over year. Net income for the period was $26.17 billion. However, revenue from search rose 12 percent year-over-year to $63.25 billion. Schindler said the search revenue slowdown was caused by lower monetization in AI Mode. He added that each AI Mode query earns less revenue compared to a similar web search. Strong growth in AI mode queries had an impact because of this lower monetization. AI Mode searches are not as lucrative as Google's existing search business, which brought in just under half of Alphabet's quarterly revenue.

Alphabet shares fell 8% following the third-quarter earnings results. The stock price was down about 13 percent earlier in the day as of the story's publication. Google reported earnings per share of $2.12, while the consensus projection was $3.02. The company spent $51.4 billion on infrastructure in the third quarter. Google Cloud revenue was $24.75 billion for the third quarter. Cloud revenue more than doubled year over year to $30.7 billion, up 103 percent. CEO Sundar Pichai said the Gemini app has reached one billion users. Google's APIs for its own models process nearly 32 billion tokens per minute.