Google's AI search problem finally shows up in the earnings report, some investors believe
Summary
- Google's stock dropped up to ten percent after third-quarter search revenue grew 12 percent, missing the 15 percent analyst expectations.
- Management acknowledged that fast-growing AI mode queries currently generate less monetization than traditional search.
- Google Cloud revenue more than doubled year over year to $30.7 billion, driven by surging enterprise demand.
- Capital expenditures reached $51.4 billion in the third quarter alone, with significantly higher spending expected in 2027.
- CEO Sundar Pichai stated that the Gemini app reached one billion users, while Google APIs process nearly 32 billion tokens per minute.
Why it matters
Google's financial results highlight the ongoing tension between the lower monetization of AI-powered search and the massive capital investments required for AI infrastructure, even as cloud revenue booms.