Shares in Google's parent company fell more than 12 per cent in their steepest one-day decline since the firm's 2004 stock market debut, wiping tens of billions of dollars from its market value after quarterly results missed expectations and raised questions about the impact of artificial intelligence on its core search business.
The drop came 22 years after Google went public, during which time it has expanded through recessions and antitrust investigations while maintaining a dominant position in online search. The latest earnings have led some investors to focus on whether users may increasingly turn to AI chatbots such as ChatGPT for answers instead of using traditional search.
For more than two decades, Google has been a leading internet search engine, generating substantial advertising revenue from billions of daily queries. AI chatbots now offer an alternative by allowing users to ask questions and receive conversational responses without navigating multiple web pages.
Google is developing its own AI systems to compete with products from OpenAI and others, while investors assess whether the company can maintain the profitability of its existing search and advertising operations as it increases spending on new AI technologies.
Is ChatGPT Quietly Rewiring How We Search?
Google faces growing competition from artificial intelligence assistants, which offer an alternative way for users to find information and products online.
Instead of entering queries into a search engine and reviewing multiple websites, users can ask tools such as ChatGPT to explain a topic, recommend products or provide answers within a single conversation.
Analysts say this could affect Google because its search business relies heavily on advertising, which depends on users performing traditional searches that generate opportunities to display adverts.
The competitive pressure is not limited to OpenAI. Meta is also expanding in the AI assistant market with its Muse AI agent. Meta chief executive Mark Zuckerberg has said 10 million people have already set up Muse, with most users accessing the app for shopping.
Analysts say that if AI agents become a common way to discover and buy products, they could challenge Google's role in linking consumers with businesses. Google continues to have a large user base, with billions of people using its services each day, and there is currently limited evidence that AI tools are leading to a significant decline in usage.
Google's Search Advertising Growth Is Slowing
Google reported slower growth in search advertising revenue in the third quarter, as the company said newer AI-powered search formats are currently less profitable than traditional results.
Google Search and other revenue totalled $63.35 billion (£47.31 billion) in the period, up 12 per cent on a year earlier. This compared with growth of 17 per cent in the previous quarter and 19 per cent in the first three months of 2026.
The figure was below analysts' expectations, which had forecast search revenue of about $64.99 billion (£48.53 billion).
Google's chief business officer, Philipp Schindler, said lower monetisation of AI Mode was one factor behind the slower growth in search revenue. The company is continuing to develop AI-powered search features as rivals such as ChatGPT and Meta's Muse compete to attract users seeking information online.
Google's AI Success Comes With a Staggering Price Tag
Google is increasing spending on artificial intelligence as it expands its Gemini product line, while reporting quarterly results that fell short of market expectations.
Hours before its earnings announcement, the company unveiled Gemini 4 Carbon, saying its latest frontier AI model outperforms its predecessor, Gemini 4 Argon, as well as competing models from OpenAI and Anthropic.
Google chief executive Sundar Pichai said the Gemini app now has more than one billion users, which the company describes as the fastest-growing app in its history. The latest user figures did not prevent a negative market reaction to the results.
Google reported earnings per share of $2.12 (£1.58) on revenue of $127.58 billion (£95.27 billion), below analysts' forecasts of earnings per share of $3.01 (£2.25) and revenue of $127.93 billion (£95.53 billion).
Advertising revenue was $82.01 billion (£61.24 billion), compared with expectations of $83.5 billion (£62.35 billion).
Google Cloud reported revenue of $30.71 billion (£22.93 billion), ahead of forecasts of $29.1 billion (£21.73 billion), an increase of 103 per cent.
The company also reported a further decline in free cash flow, from negative $5.85 billion (£4.37 billion) in the second quarter to negative $9.06 billion (£6.77 billion) in the third. Google attributed the decline to higher capital expenditure on data centres and specialised chips for AI systems.
Investors Want To Know When the AI Billions Will Pay Off
Analysts say investors are focused on when Google's heavy spending on artificial intelligence will start to generate higher profits.
On Tuesday, Oracle said it would become the first company to purchase Google's AI processors for use in its own data centres, potentially opening another revenue stream for Google.
Dan Ives of Yorkville Ives described Google's cloud performance as strong. 'Cloud doubling on contracted demand with margin expanding at the same time settles the demand side of the capex debate for this quarter, and TPU systems contributing now rather than next year puts a second growth engine on the field the other hyperscalers do not have.'
Market attention is now on whether Google can turn its AI investments into a sustainable business while maintaining its search and advertising operations.
ChatGPT, Gemini and Meta's AI agents are all competing to become users' preferred way of finding information online, introducing new competition for Google's search business. Google continues to dominate online search, but some analysts say younger internet users may increasingly turn to AI assistants rather than traditional search results.
Executives at Google have said AI-powered searches currently generate less revenue per query than traditional searches, which could reduce the value of overall search traffic even if user numbers remain high.
