Google saw its stock drop as much as ten percent after third-quarter search revenue grew by 12 percent, missing the 15 percent growth analysts had expected. Management acknowledged that the fast-growing AI search mode currently brings in less revenue than traditional search methods. Despite the monetization gap, Google reported that the annual growth rate for search queries reached its highest level in five years, while CEO Sundar Pichai announced that the Gemini app has surpassed one billion users.
To support its ongoing transition, Google is heavily investing in infrastructure. Capital expenditures reached $51.4 billion in the third quarter alone, with even higher spending anticipated for 2027. Meanwhile, the cloud division more than doubled year over year, growing 103 percent to $30.7 billion. Cloud chief Thomas Kurian expects that AI agents will continue to drive this expansion by requiring additional compute, storage, and database capacity for reasoning tasks.
This earnings report highlights the early financial friction tech giants face as they shift core monetization models toward generative artificial intelligence.