Google's AI Search Trap: Growth Soars, Revenue Lags Behind $51 Billion Cost

Alphabet shares fell nearly 10% on Wednesday after the company reported that AI-powered search queries generate significantly less revenue than traditional search, despite driving the highest query growth in five years. Google's search revenue rose 12% to $63.25 billion in the third quarter, below the 14.5% growth recorded a year earlier. Chief Business Officer Philipp Schindler attributed the slowdown to lower monetization in "AI Mode," though he argued the feature captures new high-value commercial intent. Google spent $51.4 billion on infrastructure in the quarter, contributing to a net profit of $26.17 billion, down from $35 billion a year earlier. The company activated AI Mode ads globally on Wednesday and maintained its 2026 investment forecast of $195-205 billion.