Google parent company Alphabet announced its third-quarter financial results on Wednesday afternoon, revealing strong revenue growth for the months of July through September. Despite taking in massive earnings, the company’s stock price suffered one of the largest post-earnings drops in its history due to concerns over artificial intelligence spending and profitability.
Financial Results and Market Reaction
Alphabet generated nearly $128 billion in revenue during the third quarter, producing over $26 billion in net income. Although revenue rose 25 percent compared to the previous year, net income was nearly $9 billion lower, leaving financial markets unimpressed. Following the report, the company’s stock price fell by almost 12 percent after having dropped about 13 percent earlier in the day.
The 25 percent year-over-year revenue increase fell short of Wall Street expectations. Google reported earnings per share of $2.12, whereas analysts had projected a consensus consensus of $3.02 ahead of Wednesday. On a positive note, Google’s Cloud division exceeded expectations by generating over $30 billion in revenue, roughly $1 billion higher than analyst predictions.
AI Search Challenges and Declining Growth
Google has heavily integrated generative artificial intelligence across its ecosystem in recent years, ranging from Gmail to Android, with its search platform now driven by Gemini models. During the earnings call, Chief Business Officer Philipp Schindler addressed search volume metrics, noting that search grew by 12 percent year over year in the most recent quarter. However, this represents a slower growth rate compared to previous quarters, which saw 19 percent growth in the first quarter of 2025 and 17 percent growth in the second quarter. Furthermore, search revenue remained flat in the third quarter.
Schindler explained that Google’s AI search format generates less revenue than traditional web search because each AI Mode query features fewer ads and lower ad costs, a trend likely accelerated by users turning to AI chatbots for answers.
