Google expands AI Search ads as core ad growth slows

By Elena Vasquez

On Wednesday, Alphabet reported $127.6 billion in third-quarter revenue, up 25% year over year. Following the results, Alphabet’s shares fell 8%.

Google Search revenue grew 12% year over year in the third quarter. Alphabet reported 17% growth in the second quarter and 19% in the first. The deceleration puts added pressure on Google to turn its expanding AI features into a meaningful source of advertising revenue.

During Wednesday’s earnings call, Philipp Schindler, Google’s chief business officer, outlined the company’s answer: scale ads inside AI-powered Search experiences, then take that monetization beyond the United States for the first time.

What changes in Google’s Search ads?

Schindler said:

“We are now scaling high-quality ads within AI overviews in AI mode to more users and queries,”

“This includes taking our monetization footprint global for the first time. Today, we’re announcing the expansion of ads in AI mode into international markets alongside multi-turn ads and AI mode in the U.S.”

Schindler’s announcement has three concrete parts. Google is scaling ads within AI Overviews and AI Mode to more users and queries. It is taking AI Mode ads into international markets. It also covers multi-turn ads alongside AI Mode in the U.S.

Google first previewed this direction in May with new Gemini-powered ad formats. The company said the products included conversational discovery and recommendations placed directly inside AI-generated answers.

Google’s May lineup included:

• Conversational discovery ads that respond to a user’s questions.
• Sponsored recommendations integrated into AI-generated answers.

What do the early ad results show?

Schindler said early results suggest the formats are working. Sponsored product listings in AI Mode already have click-through rates comparable to organic listings, according to Schindler. Google’s user research also indicates that people find the ads relevant.

For now, the company’s case rests on those two measures. Schindler cited engagement through click-through rates and perceived relevance through user research. His comments framed both findings as early results from the new formats.

The timing gives the rollout strategic weight. Alphabet’s Search growth has fallen for two consecutive quarters, from 19% to 17% to 12%. Google is trying to build a new advertising layer while the pace of its established Search business cools.

How are people using AI Mode?

Google CEO Sundar Pichai said Search queries grew at their fastest year-over-year rate in five years. He did not disclose the exact rate. He credited AI features with changing how people use Search, including prompting longer and more complex queries.

Pichai supplied three usage figures:

• Queries in AI Mode are three times longer on average than traditional searches.
• One in five AI Mode searches globally involves voice, images, or documents.
• Google has surpassed 50 billion visual searches per month.

Pichai described the change in his own words:

“[Search] is bringing the benefits of AI to more people than any other product in the world,” Pichai told investors.

“People are using our AI features more, searching in entirely new ways. Their queries are longer, personalized, and multimodal.”

The figures show that AI changes the shape of a search, not just its volume. Queries in AI Mode carry more words, and one in five uses voice, images, or documents. The ad announcement arrives as users adopt those longer, more complex and multimodal searches.

That combination gives Google a direct reason to test advertising in AI Mode. The company sees changing search behavior as a route to new revenue opportunities, even while core search advertising growth slows.

How fast is Google’s core business growing?

Alphabet’s Google Services division, which includes Search, generated $96.3 billion in revenue, up 11% year over year. Google Cloud revenue surged 103% to $30.7 billion, according to Alphabet. The company’s overall revenue grew 25% to $127.6 billion.

The segment figures put the earnings tension in view. Search grew 12%, Cloud grew 103%, and Google Services grew 11%. Alphabet’s 25% overall growth sat beside an 8% share decline following the results.

This is the market pressure behind the ad push. Search remained positive, but 12% was down from both 17% and 19% in the preceding quarters. Google has more reason to make its AI interfaces commercially productive.

The slowdown also changes how investors may judge the AI products. A billion monthly users for the Gemini app demonstrates reach, while faster Search revenue growth would show how that activity translates into money. Alphabet reported both figures in the same release.

What else shaped the quarter?

The ad expansion came during a busy release cycle for Google. The quarter included three major developments:

• The release of Gemini 4 Argon.
• Growth of the Gemini app to one billion monthly users.
• The launch of the Pixel 11 lineup.

These announcements placed the Search ad rollout within a broader product cycle. Gemini 4 Argon was a model release, the Gemini app had reached one billion monthly users, and Pixel 11 was a hardware launch.

The developments extended well beyond Search advertising. They also gave Google’s wider AI push a model, a consumer app at billion-user scale, and a new phone line during the same earnings period.

Why do the ads matter now?

Google is betting that generative AI can open new revenue opportunities even as its core search advertising business slows. The international rollout is the clearest test. It moves ads in AI Mode beyond the U.S. while expanding the formats to more users and queries.

The early signs are promising, but Schindler described them as early results. He cited comparable click-through rates for sponsored product listings and organic listings. He also pointed to user research showing that people find the ads relevant.

The financial stakes are clearer. Search growth slowed from 19% in the first quarter to 17% in the second and 12% in the third. Google’s broader business still grew, with Google Services at $96.3 billion and Google Cloud at $30.7 billion. The ad rollout gives the company another route to convert AI activity into revenue.

That route now extends to international markets. Its results will carry more weight because Google’s established Search advertising engine is growing at a slower rate. The coming quarters will show whether longer, multimodal AI queries can produce enough advertising revenue to offset that slowdown.