On 22 July, Alphabet, Google's parent company, reported quarterly revenue of $119.8 billion, up 24% and above the $117 billion analysts expected. The share price nevertheless fell by around 5%, with investors focusing on the announcement of a higher AI budget than planned.
The facts
- Advertising tied to Google search (Search & Other) grew 17% to $63.3 billion, driven, according to Sundar Pichai, by the merging of AI Overviews and AI Mode.
- YouTube advertising revenue reached $11.1 billion (+13%), driven by more than 1.7 billion unique viewers on videos related to the 2026 World Cup.
- Alphabet announced a higher annual capital expenditure budget than expected, $195-205 billion against the $180-190 billion announced the previous quarter; that announced increase, rather than revenue, is what sent the share price down.
Why is search advertising accelerating despite the shift to generative AI?
For two years, one worry has dominated among search professionals: that generative AI would divert queries, and therefore advertising budgets, away from Google. The quarter points the other way: search advertising is accelerating, driven by the integration of AI Overviews and AI Mode directly into the search experience. One caveat tempers the picture: excluding exceptional financial gains, adjusted earnings per share came in at $2.85, below the $2.89 the market expected.
For advertisers, the shift is already measurable inside Google Ads accounts. Half a million advertisers have adopted AI Max campaigns, which generate on average 15% more conversions at a comparable return on ad spend, a sign that the format already belongs to everyday bidding strategies rather than to some distant future.
AIxH's view
This is the ground our Digital advertising team covers: bringing AI Max formats and generative inventory into Google Ads management, rather than waiting for them to be imposed on everyone. As a Google Ads agency in Luxembourg, we follow these quarterly results to adjust our clients' bids before the market forces the change. If you want to assess your Google Ads account against these new formats, a first conversation is enough to establish a diagnosis.