Google falls up to 10% as search growth misses at 12%

The quarter crystallizes a tension that has hung over Google's core business: AI-powered search queries are growing fast, but they still generate less money than traditional search. Executive Philipp Schindler acknowledged on the earnings call that "the strong growth in AI mode queries had an impact because of the lower monetization," among other factors. Investors reacted sharply, wiping up to ten percent off the company's market value, according to the report.

Context matters here. Traditional search has been declared dead for years and keeps growing anyway; this quarter's growth rate was slightly below expectations but in line with recent years, and Google is only beginning to monetize AI mode. The company also said the annual growth rate for search queries hit its highest level in five years. On the call, it announced plans to expand its ad program for chatbots in the U.S. and internationally, a move that could narrow the monetization gap over time, though the body offers no timeline.

Beyond search, the report shows a company spending heavily on what comes next. Google Services revenue rose 11 percent to $96.3 billion, YouTube advertising grew 9 percent to $11.2 billion, and operating margin reached 40.7 percent. Google Cloud more than doubled revenue to $30.7 billion, up 103 percent, with operating margin expanding to 36.2 percent. Capital expenditures hit $51.4 billion in the third quarter alone, and the full-year 2026 forecast remains at $195 billion to $205 billion, with a "significantly higher" figure expected for 2027. CEO Sundar Pichai said the Gemini app has reached one billion users, and Google's APIs process nearly 32 billion tokens per minute, more than four times as many as a year ago — though part of that jump likely reflects token inflation from reasoning models and agentic workflows rather than higher usage alone, the report notes.