Shares of Alphabet dropped sharply as concerns mount over Google’s new AI-powered Search offering, dubbed AI Mode. The company recently confirmed that despite strong growth in user engagement, AI Mode delivers lower monetization compared to Google’s traditional Search platform.
During Alphabet’s Q3 earnings, Global Advertising Chief Philipp Schindler acknowledged that while AI Mode queries are increasing, they’re not yet contributing to revenue at the same levels as conventional Search ads. The company did emphasize, however, that its internal ad experiments have shown encouraging results, prompting plans to intensify ad placements within both AI Overviews and AI Mode itself.
Ad Expansion to New Markets & Multiturn Ads
Google has announced that AI Mode ads will now roll out globally. In markets like Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines, and Singapore, users will begin seeing sponsored content. In Q4 2026, the company intends to introduce this expansion to Brazil, Mexico, and the United Kingdom. US users will also get ‘multiturn ads’ during follow-up Search queries.
The rationale is rooted in research showing that users are generally comfortable with ads in AI Mode and that click-through rates for sponsored vs. organic product listings are already aligning.
Stock Dip Linked to Weak Earnings, Not Just AI Mode
Despite the excitement around AI Mode, Google’s stock suffered a sharp decline—falling to about $280, just above its late-March low of $273.14. The slide followed Google’s third-quarter earnings release, with analysts pointing to broader underperformance in revenue, especially in Search ad revenue, than to AI Mode’s model directly.
The stock fell by roughly $27 amid investor reaction to the earnings call. This downturn in market value is among the largest ever for Alphabet, narrowing its lead over comparable tech behemoths. While AI Mode contributes to some underlying sentiment, it was the weaker-than-expected financials that largely triggered the decline.
Search ads still represent nearly half of Google’s overall revenue—a sign that traditional advertising remains essential even as the company shifts toward AI-infused experiences.
Analytical Angle: Google’s push to monetize AI Mode globally and introduce multiturn ads suggests the company is accelerating its transition toward more conversational, AI-driven search tools. But the lower revenue per query poses a structural challenge. As more markets roll in and users adjust, the real test will be whether Google can close the revenue gap with traditional Search without turning users away. Watch for evolving ad formats, regional uptake, and how AI Mode’s margins perform in the months ahead.
