Alphabet shares decline as AI search monetization lags

Alphabet Inc. experienced a sharp decline in market value last week, with shares falling more than 12 percent following its third-quarter earnings report. The drop, which wiped out approximately $500 billion in market value, marked the parent company's worst single-day performance since 2004.

The revenue pressure stems from a shift in user behavior toward AI-integrated search results. During an earnings call, Chief Business Officer Philipp Schindler acknowledged that the rising popularity of AI modes has slowed search advertising growth due to the lower monetization capabilities of AI-generated responses. While Alphabet's total revenue rose to $127.6 billion, the 12 percent growth rate in search advertising fell short of previous benchmarks.

To address the monetization gap, Google plans to increase the integration of advertisements within its AI Overviews. The company confirmed it is scaling its advertising footprint for AI features globally, attempting to bring the revenue potential of AI-driven search closer to the levels historically provided by traditional web search.