Google admits AI search makes less money, but it's fixing that with more ads

What's happening

Google says its new AI-powered Search format is generating less ad revenue per query, contributing to a wider slowdown in core ad growth even as Alphabet reported Q3 revenue of $127.6 billion, up 25% year over year. The company's cash flow swung negative, with reports citing -$9.06 billion following the quarter, and Google has spent heavily on AI infrastructure (reported as $51 billion) while still renting external compute. In response, Google is expanding AI Search ads globally and pushing more ad placements into AI Mode searches to make up the shortfall.

Why it's trending

Advertisers and investors are reacting to lower monetization from AI-style search results just as Google ramps AI features and infrastructure spending.

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