Key Highlights

  • Google's ad Revenue rose 10.6% to USD 82.0 billion in the third quarter, while search Advertising grew 12%.
  • A Google executive said lower monetization in AI Mode weighed on revenue, even as query growth hit a five-year high.
  • Google Cloud revenue more than doubled to USD 30.7 billion, while quarterly free Cash Flow was negative USD 9.1 billion.
  • Meta's ad revenue grew 26% to USD 63.1 billion, while Amazon's ad growth slowed to 10.9%, citing Prime Day timing.

A Question the Quarter Reopened

Soon after Chatbots entered the mainstream, some investors worried that they would erode one of the most profitable businesses of recent decades, Google search. For a time ad sales kept growing and the fear faded. Third-quarter results from Alphabet (NASDAQ:GOOGL), released on Oct. 28, brought it back. Search revenue missed analyst estimates for a second straight quarter, according to coverage of the results, and Alphabet shares fell after the report.

The concern is not that people use Google less. Chief executive Sundar Pichai said that "our year-over-year query growth rate is the highest it's been in the last five years." The concern is how much each of those queries earns.

What the Quarter Showed

Google's advertising revenue rose 10.6% to USD 82.0 billion, or 64.3% of Alphabet's total revenue of USD 127.6 billion, which grew 25%. Search and other revenue was USD 63.35 billion, up 12% from a year earlier, compared with growth of 15% in the third quarter of 2025, and only USD 79 million above the second quarter. YouTube advertising rose 9.2% to USD 11.2 billion, against 15% a year earlier. Coverage of the results listed foreign exchange, weakness in Asia-Pacific retail and a return to normal after a World Cup-boosted second quarter as headwinds for search.

Google Cloud, the other growth engine, more than doubled. Its revenue rose 103% to USD 30.7 billion from USD 15.2 billion, and its Operating Income reached USD 11.1 billion from USD 3.6 billion. Alphabet's Net Income fell to USD 26.2 billion from USD 35 billion, largely because of a USD 8.7 billion loss on Equity securities.

The Spending Side

Capital expenditure reached USD 51.4 billion in the quarter, up 114% from a year earlier. Operating Cash Flow was USD 42.3 billion, which left free cash flow at negative USD 9.1 billion. Over the Trailing Twelve Months free cash flow stayed positive at USD 19.7 billion, against capital spending of USD 159.8 billion. Alphabet's guidance for 2026 capital spending is USD 195 billion to USD 205 billion, and the company has said it expects a significant increase in 2027.

The AI Mode Problem

What drew attention was a direct acknowledgment about AI Mode, the conversational search experience that Google is building into search. The company's chief Business officer, Philipp Schindler, said strong AI Mode query growth affected results because of "the lower monetization we were seeing in AI Mode." Pichai said that "we are focused on building the best search user experience, followed by monetization."

Google is expanding ads in AI Mode internationally and bringing a multiturn ad format to the United States. Alphabet did not publish figures for paid clicks or cost per click, and said more information would appear in its quarterly filing. Competition is also widening: OpenAI has built an advertising business for ChatGPT, and Google's Universal Shopping Cart began rolling out in the United States in October.

Meta and Amazon Report Different Pictures

Meta, which reported on Oct. 21, said advertising revenue grew 26% to USD 63.06 billion from USD 50.08 billion, within total revenue of USD 64.6 billion, also up 26%. Google's advertising revenue remains about USD 19 billion larger, but it grew at less than half the pace. Meta's Capital Expenditure in the quarter was USD 34.91 billion, including principal payments on finance leases.

Amazon, which reported on Oct. 29, said advertising revenue rose to USD 19.64 billion, up 10.9% as reported and about 12% excluding currency effects, against 26% in the second quarter. The company blamed timing anomalies primarily related to Prime Day, which fell mostly in June this year after running entirely in the third quarter of 2025, and said it expects fourth-quarter advertising growth in the high teens. Combining the second and third quarters, one trade publication calculated growth of about 18%.

What the Ad Business Is Asked to Fund

Advertising is carrying a heavier load than it did a few years ago. Google's ad business supplies most of Alphabet's revenue, and the company is funding Data Center spending of up to USD 205 billion this year while free cash flow turned negative in the quarter. That makes the growth of search and YouTube advertising central to how the buildout is paid for.

The central measure is the gap between query growth and revenue growth. Alphabet gave no query figure, but search revenue grew only USD 79 million from the previous quarter while Pichai described query growth at a five-year high. If the two move closer, AI Mode is monetizing nearer to classic results. The quarterly filing, with its details on paid clicks, supplies the first fuller reading. Cloud revenue, which more than doubled, is the other source of growth the company can draw on, and Amazon's fourth-quarter advertising results show whether its timing explanation holds. Against Meta, the comparison to follow is the pace of advertising growth, 10.6% at Google against 26% at Meta in the quarter.