Google Search Falls Below Half of Alphabet Revenue for First Time

According to Ars Technica, Google has acknowledged that AI search is less profitable than traditional web search. Chief Business Officer Philipp Schindler said each AI Mode query earns less revenue than a comparable web search because there are fewer ads and they cost less to run, though he said AI Mode revenue should increase over time and warned advertisers may need time to see the value.

Google is responding by expanding advertising inside AI Mode. New contextual ads will roll out in more international markets soon, and in the US the company will introduce multi-turn ads, meaning sponsored links change as a conversation with the chatbot continues. CEO Sundar Pichai said these longer back-and-forth interactions are becoming more common.

The spending behind all of this is enormous. Google reported capital expenditures of $51.4 billion in the quarter and expects total 2026 spending of $195 billion to $205 billion, with more than $300 billion targeted for AI investment in 2027. Alphabet's net income came in more than $9 billion lower than a year earlier, and earnings per share of $2.12 fell well short of the $3.02 analysts expected.

If you use Google Search or AI Mode in Tunisia, expect to see more ads inside AI answers, including sponsored links that shift as you keep chatting. Google has not announced a date for when AI Mode ads will reach Tunisia, so availability here is still unconfirmed.

For readers watching Google, the bigger signal is structural: Search is still growing, but it is no longer the majority of Alphabet's business. Whether that is healthy diversification or a warning depends on whether AI search can eventually earn as much per query as the classic blue links did.