Alphabet reported third-quarter 2026 results on October 28: revenue rose 25% to $127.6 billion, and Google Search & other grew 12% to $63.35 billion. Year over year, search query growth was the strongest in five years.
Money is growing more slowly than queries, though. Chief Business Officer Philipp Schindler named the reason on the analyst call: query growth in AI Mode weighed on results because the mode monetizes at a lower rate.
Google Network, which sells inventory from third-party publishers, brought in $7.455 billion, up 1.4% from a year earlier. Traffic acquisition costs (TAC), the payments to partners for traffic, rose about 10% to $16.4 billion. Traffic costs are growing noticeably faster than the network's revenue.
The advertising share of revenue fell. Google advertising, which combines Search, YouTube and Network, generated $82.0 billion of the $127.6 billion total, or about 64%. A year earlier the share was about 72%.
The market reacted sharply: Alphabet shares fell more than 12% on Thursday, October 29. The drop wiped out about $500 billion in the company's market capitalization.
Google has already flagged the next step in monetizing AI Mode: the company is expanding ads in AI Mode. Alphabet will publish its fourth-quarter report in early February, as it did last year; the last report came out on February 4.
