Alphabet Q3: revenue up 25% to $127.6B, but AI Mode queries are diluting Search monetization
sudoraohacker · x · 2026-10-29
sasocapital's key takeaways from Alphabet's Q3 2026 earnings call:
- Search slowed even as query growth hit a five-year high: Search and other ads grew 12% to $63.3B, decelerating from Q2. Four causes: FX drag (the biggest), the EU ending its de minimis exemption hitting APAC retail advertisers, World Cup media budgets landing in June, and fast-growing AI Mode queries on a surface with "lower monetization" than classic Search. The first three wash out; the fourth is structural — more usage shifting to a lower-revenue-per-query surface.
- Core business remains strong: Revenue up 25% to $127.6B, operating income up 30% to $40.6B at a 31.8% margin.
- EPS miss is mostly non-operating: EPS came in at $2.12 vs $3.02 expected, driven by OI&E swinging negative, largely a SpaceX valuation mark.
Related event: Alphabet Misses on Revenue and EPS, Wiping Out ~$500B in a Day(43 posts)→
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