Google is grappling with falling profitability in its flagship search business after integrating artificial intelligence features and chat-style answers. According to the technology publication Ars Technica, citing Alphabet's third-quarter 2026 financial report, company executives acknowledged that the "AI mode" answer format generates less money than the classic search results page with a list of ranked links, significantly reducing monetization of each individual query, the website infohub.kz reports.
The disclosure of the financial results sent Alphabet shares tumbling on the stock market, wiping out hundreds of billions of dollars in market capitalization. Investors were rattled by the corporation's negative free cash flow, which reached minus $9.06 billion amid massive capital spending on data center infrastructure and AI chips.
Conversational summaries generated by generative models satisfy users' interest directly on the search page, so audiences click through to traditional paid advertising links less often. That is precisely what is undermining the search giant's revenue base.
To offset declining revenue from its key advertising segment and recoup spending on computing power, Google plans a large-scale integration of new ad units directly into AI-generated text answers. Holding executives announced a global expansion of commercial formats in AI search, hoping to restore digital advertising's former profitability through sponsored recommendations.