Google’s search advertising business barely moved from the prior quarter, and an Alphabet executive attributed part of the drag to AI Mode, the company’s conversational search experience. Search & other revenue rose 12% year over year to $63.35 billion in the third quarter of 2026, according to Search Engine Journal’s coverage of the earnings call. That compares with $63.27 billion in the second quarter, so sequential growth was close to zero.
Year-over-year growth has now cooled twice in a row. Search & other expanded 19% in the first quarter and 17% in the second, per the same report. Search Engine Roundtable noted that the $63.35 billion figure fell short of the $64.96 billion analysts had expected, and that Alphabet shares dropped more than 11% in after-hours trading.
Chief Business Officer Philipp Schindler named three causes for the slower pace. Currency movements ranked first. Retail took a hit too, because the European Union scrapped its duty-free threshold on cheap imports (the de minimis rule), which hurt some advertisers based in Asia-Pacific. Media and entertainment budgets settled back after a strong second quarter that included the FIFA World Cup.
AI Mode monetization entered the discussion when J.P. Morgan analyst Doug Anmuth asked why queries were growing faster than search ad revenue. Schindler cited currency, retail, and media first. He then said strong AI Mode query growth weighed on search revenue growth because those queries monetize less. He did not say what AI Mode monetizes less than, and he did not size the effect in dollars.
CEO Sundar Pichai framed the trade-off as deliberate. “Just like our shift to mobile over a decade ago, we are focused on building the best Search user experience, followed by monetization,” he told analysts. Pichai also said annual query growth is at its best pace in five years, and that AI investment is lifting commercial queries as well. In prepared remarks, Schindler said many new AI Mode questions sit higher in the purchase funnel and that most AI Mode queries add to existing search activity, which he argued will create more ways to earn money over time.
Chief Financial Officer Anat Ashkenazi added two points on timing. Currency was a small headwind to annual growth and a larger one to sequential growth. Search also faced a tougher comparison, because growth kept accelerating through the second half of 2025. For the fourth quarter, she said, a slightly larger currency headwind is expected at current spot rates, and lapping last year’s acceleration will keep pressure on growth.
Google paired the earnings with advertiser news. Ads in AI Mode are scaling across ten markets: Canada, Australia, New Zealand, India, Pakistan, Malaysia, Singapore, the Philippines, Kenya, and Nigeria. Planned fourth-quarter additions include Brazil, Mexico, and the United Kingdom. Ads that appear in follow-up questions are also launching in the United States. Campaigns already running on Search, Shopping, or Performance Max qualify automatically, and there is no separate opt-out.
Google’s own evidence for AI Mode ad performance is thin and internal. Shashi Thakur, who leads Google Search Ads, wrote that sponsored and organic product listings in AI Mode draw “similar” click-through rates. A footnote traces that comparison to Google’s internal U.S. data from August 20 through September 3, 2026. No independent measurement accompanies it.
For paid search teams, the practical point is reach and reporting. Advertisers cannot target AI Mode on its own, and results appear within aggregate campaign and search terms reports. Campaigns built on broad match or AI Max are positioned to qualify for the contextual matching that exploratory questions require, while exact and phrase match campaigns are narrower. Teams cannot yet isolate AI Mode spend from the rest of Search.
Organic teams got less. As Search Engine Journal noted, neither Pichai’s published remarks nor the call included a figure for clicks sent to websites, so the quarter explains how Google earns from AI Mode and says nothing new about publisher traffic.
Over the next ninety days, budget owners should expect AI Mode inventory to grow faster than the means to measure it, and should test whether broad match and AI Max shift their conversion mix before committing more spend. Publishers should treat the absence of click data as a reason to track AI Mode referrals in their own analytics.
Based on reporting from Search Engine Journal and Search Engine Roundtable, both published October 28, 2026.
