Google's AI search problem finally shows up in the earnings report, some investors believe

Google's latest quarterly report triggered a sharp sell-off, with shares dropping as much as 10% after investors focused on slower-than-expected search growth. While cloud revenue more than doubled to $30.7 billion, search revenue rose just 12%, a deceleration that raised questions about the company's AI strategy.

Google acknowledged that its fast-growing AI mode, which provides direct answers to queries, generates less revenue per search than traditional ad-supported results. This creates a fundamental tension: AI features are attracting users, but they are not yet converting into equivalent advertising dollars.

The earnings highlight a broader industry challenge. As AI assistants increasingly answer questions directly, search engines must rethink their ad models. Google's ability to monetize AI search effectively will be a key metric for investors and a benchmark for competitors navigating the same transition.

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