Alphabet shares fell 10% in extended trading, erasing about $400B in market value, after third quarter revenue and earnings missed analyst estimates and executives said lower monetization on fast growing AI Mode queries weighed on search ad performance. Speaking on the earnings call, management noted that “the strong growth in AI mode queries had an impact, because of the lower monetization we were seeing in AI mode,” though the company is now scaling ads inside AI Overviews and AI Mode across international markets and US multi-turn searches. Search and Other revenue rose 12% to $63.35B, missing the $64.85B consensus and falling below 50% of total revenue for the first time even as overall search query growth reached a five year high.

Total revenue climbed 25% to $127.58B, short of the $127.93B estimate, as total advertising sales of $82.01B and YouTube ad revenue of $11.21B both missed forecasts. Earnings per share dropped 26% to $2.12 against a $3.01 consensus, weighed down by an $8.2B net other expense driven mainly by a drop in the value of Alphabet’s SpaceX stake; net unrealized losses on equity securities totaled $8.7B, cutting $0.55 from EPS. Operating income rose 30% to $40.58B, below the $43.16B estimate, even as Google Cloud revenue surged 103% to $30.71B and cloud operating income more than tripled to $11.1B on a 36.2% margin. First party model APIs processed nearly 32B tokens per minute, and the Gemini app reached 1 billion users.