Growing Numbers, Disappointed Market
Alphabet reported Wednesday afternoon its third-quarter 2026 results, closing with nearly $128 billion in revenue and more than $26 billion in net profit. Revenue rose 25% from a year earlier, but net profit was nearly $9 billion lower. According to Ars Technica, the stock lost nearly 12% and in the morning had hit a 13% drop, one of the sharpest post-quarter declines in the company's history.
The comparison with expectations explains much of the reaction: reported earnings per share were $2.12, versus $3.02 expected by analysts. Cloud products ran counter to the trend, exceeding $30 billion in revenue, about $1 billion above forecasts.
AI Search Is Worth Less, More Advertising in Response
During the earnings call, Chief Business Officer Philipp Schindler indicated that search grew 12% year over year, against 17% in the second quarter and 19% in the first: a slowdown that the source also links to greater use of chatbots to find answers. Search revenue remained flat in the quarter.
Schindler acknowledged that each query in AI Mode generates less revenue than a comparable web search, because there are fewer ads and they cost less. He added that advertisers might need time to understand their value, citing internal research according to which users find these ads more relevant. Google therefore announced the expansion of advertising in AI Mode to more international markets and, in the United States, the introduction of multi-turn ads that change during the conversation with the bot.
Accelerating Spending and Risks to Be Verified
Google plans to further increase AI investments: total spending for 2026 is expected to be between 195 and 205 billion, with a target above 300 billion for 2027. Cash flow for the quarter was negative 9.06 billion, worsening from the previous -5.8 billion, and the company cites the doubling of cloud revenue over the past year in support of this strategy.
The actual growth of ad revenue in AI Mode and the resilience of cloud demand remain to be verified: according to the source, much of that demand depends on startups funded by venture capital. If such funding were to shrink or search growth were to stall, the company could face wider losses.
