Google sees slower ad revenue growth despite AI-driven search increase

Google's parent company Alphabet reported the fastest growth in search queries in five years, according to The Verge. However, the increase in search activity driven by artificial intelligence has not translated into faster revenue growth for Google's core business.

In the third quarter, Google's Search revenue growth slowed to 12 percent year over year, down from about 17 percent in the previous quarter. Growth in paid clicks, which generate advertising revenue, also declined from 13 percent to 8 percent during the same period.

Chief Business Officer Philipp Schindler attributed the revenue growth slowdown primarily to currency effects and changes in advertiser spending across certain industries. He also noted that AI-powered search queries, while growing strongly, are monetizing at a lower rate than traditional searches.

Alphabet is investing heavily in infrastructure to support AI, with plans to spend approximately $200 billion this year. Despite this, the company's shares fell about 14 percent following the earnings report, as investors questioned the costs and returns of its AI initiatives.

Schindler described the current situation as the first major disruption to Google's core business in decades but expressed confidence in the company's trajectory moving forward.

What we're watching: How Google adjusts its monetization strategies to better capitalize on AI-driven search growth and investor expectations.