Google Search Revenue Slows to 12% Growth as AI Mode Monetization Lags

Google Search revenue grew 12% year over year to $63.35 billion in Q3, and Alphabet's Chief Business Officer Philipp Schindler named lower monetization within AI Mode as one of three reasons growth has slowed. Search revenue was essentially flat against last quarter's $63.27 billion, after growth of 19% in Q1 and 17% in Q2 — a second consecutive quarter of deceleration.

What drove the slowdown?

Schindler attributed the biggest quarter-over-quarter drag to currency movements. Retail also took a hit, he said, as certain Asia-Pacific advertisers adjusted to the European Union's elimination of its de minimis exemption for low-value imports. Media and entertainment spending normalized after a strong Q2 that included the FIFA World Cup.

CFO Anat Ashkenazi called currency a small headwind to year-over-year growth and a larger one quarter over quarter. She also flagged a tougher compare, since Search growth accelerated through the second half of 2025. On the Q2 call in July, Ashkenazi had already warned of a slight FX headwind in Q3, primarily in Search and YouTube ads, and that Search would begin lapping last year's acceleration.

How does AI Mode fit the picture?

CEO Sundar Pichai said AI investment has driven Search query growth, including commercial queries, and that the "year-over-year query growth rate is the highest it's been in the last five years."

J.P. Morgan analyst Doug Anmuth pressed on the gap between query growth and ad revenue growth. Schindler repeated currency, retail and media first, then said strong AI Mode query growth negatively impacted Search revenue growth due to lower monetization in AI Mode. He did not state what AI Mode's monetization was lower than, nor the dollar impact on Search ad revenue.

Pichai told analysts:

"Just like our shift to mobile over a decade ago, we are focused on building the best Search user experience, followed by monetization."

Schindler added that many new questions in AI-powered Search are upper-funnel, and that the majority of AI Mode queries are incremental — which he said creates more monetization opportunities over time.

Shashi Thakur, VP and GM of Google Search Ads and Ads on Google Experiences, wrote in Google's announcement post:

"Our research shows that people are comfortable with ads in AI Mode and find them highly relevant. In fact, click-through rates are already similar between sponsored and organic product list items within AI Mode."

The footnote dates that claim to Google's internal U.S. data from August 20 through September 3, 2026. At Google Marketing Live in May 2025, Thakur told reporters that AI Overviews generate revenue "at the same rate" as those exact searches without overviews — a claim that covers AI Overviews but not AI Mode.

Where do the ads run now?

Google is scaling ads in AI Mode to ten new markets:

• Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore.
• In the U.S., Google is launching multiturn ads — ad placements in follow-up queries within AI Mode.
• Existing Search, Shopping and Performance Max campaigns are eligible by default and cannot opt out separately.

Advertisers cannot target AI Overviews or AI Mode individually; negative keywords and brand exclusions still apply. Exact and phrase match keywords serve on queries with direct commercial intent but do not qualify for contextual matching on broader, exploratory questions. AI Max for Search, broad match, Shopping campaigns and Performance Max qualify for both. Placements with AI explainers carry short Gemini-generated text built from the query, the AI response and public sources including the advertiser's site — content the advertiser cannot create, edit, approve or opt out of. Results appear in standard aggregate campaign and search-term reporting. English is the listed language for AI Overviews and AI Mode ads, and Pakistan receives text ads only.

What does this change for advertisers?

Reach into AI Mode inventory depends on whether a campaign uses AI-powered targeting such as broad match or AI Max, and standard reports blend AI Mode results into the rest of Search. In Q2, Pichai said Google was sending "billions of clicks to websites every week" through AI features; the Q3 remarks offered no clicks figure, so the quarter adds detail on monetization but none on traffic to websites.

Ashkenazi said Q4 brings a slightly larger currency headwind at current spot rates, mostly in Search and YouTube ads, alongside continued pressure from lapping last year's Search acceleration. Google plans to expand ads in AI Mode to Brazil, Mexico and the U.K. in Q4 2026.