By the close of trading on Thursday, Alphabet's total market capitalisation had fallen to $3.46 trillion. The company's stock price dropped by more than 12 percent, a decline that also weighed heavily on the wider US stock market.
Why it matters
Google has long been the default destination for people looking for answers online, and advertising tied to its search results has been the financial engine behind that position. The latest figures suggest that the company's own AI features are now changing how often users see — and click on — the ads that fund the business. For investors, the concern is not only the size of the loss but what it signals about the durability of Google's core revenue stream at a time when AI rivals are drawing users away.
AI answers are reducing ad exposure
Philipp Schindler, Alphabet's chief business officer, explained that Google's "AI Mode" responds to user queries with direct, conversational answers. Because those answers often satisfy the user's question on their own, the conventional search results that carry advertising are seen less often, and revenue from those ads has fallen as a result. Schindler nevertheless expressed optimism about the new search format.
The shift comes as Google's role as the world's main answer-finding service faces mounting competition. Millions of people are now turning to AI tools such as ChatGPT and Claude instead of the search engine, using them to get detailed responses to their questions. According to প্রথম আলো, that migration is putting pressure on the business that has underpinned Google's dominance for years.
A deliberate trade-off, former ad chief says
Kim Scott, a former head of Google's advertising division, said the company appears willing to let its own AI technology erode its search business rather than allow another firm to take over that ground. She noted that a long-term willingness to invest in technology — even at the cost of short-term losses — was one of the founding principles of Google.
The earnings report, released on Wednesday, showed Alphabet's total revenue for the three months to September rose 25 percent year on year to $127.6 billion. The figure nonetheless fell short of what analysts had expected, and the weaker-than-anticipated advertising revenue in particular unsettled investors.
Tracy Woo, a principal analyst at the research firm Forrester, said the disappointing results from Alphabet's search business illustrate how difficult it is to keep established operations on solid footing while also funding enormous investment in AI. The company now faces the task of convincing the market that its AI push can eventually pay for itself.
Investors will be watching Alphabet's next quarterly report for signs that advertising revenue has stabilised, and for any further detail on how the company plans to monetise its AI search features.
