Google is expanding advertising inside its AI-powered Search experiences to international markets for the first time, a move disclosed during Alphabet Inc.'s third-quarter earnings call on October 28 as growth in the company's legacy search ad business continued to slow1,4.
The initial rollout covers Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines, and Singapore. Google said it plans to extend AI Mode ads to Brazil, Mexico, and the United Kingdom in the fourth quarter of 2026. In the United States, the company is also launching multiturn ads, which allow sponsored placements to appear in follow-up queries within AI Mode's conversational interface.
Monetization pressure
The expansion arrives against a backdrop of decelerating ad revenue. Google Search revenue grew 12% year over year in the third quarter, down from 17% in the second quarter and 19% in the first. Alphabet reported total quarterly revenue of $127.58 billion, up 25% year over year but below the $128.22 billion consensus estimate compiled by the London Stock Exchange Group2. Earnings per share came in at $2.12, well short of the $3.02 Wall Street had expected. Alphabet shares fell 8% after the results.
The services segment, which houses search and advertising, brought in $96.3 billion, missing the $98.5 billion analyst projection. Cloud revenue, buoyed by AI development demand, beat expectations at $30.7 billion.
Philipp Schindler, Google's chief business officer, told investors the company is "scaling high-quality ads within AI overviews in AI mode to more users and queries". He added that click-through rates for sponsored product listings in AI Mode are already comparable to those for organic listings. Google's user research indicates that people find the ads relevant, according to Schindler.
Alphabet CEO Sundar Pichai said AI investments are driving Search query growth to its highest level in five years.
Spending scrutiny
The ad results compound investor concern over Alphabet's capital spending trajectory. The company has guided full-year 2026 capital expenditures to between $195 billion and $205 billion, more than double last year's outlay. Alphabet posted negative free cash flow of $5.9 billion in the second quarter, its first since going public. ANALYSIS The widening gap between AI-driven capex and softening ad returns sharpens the question of whether generative search can replace the revenue growth that traditional search is no longer delivering.
Separately, Google on October 28 opened a preview of its Connected Apps Platform, a unified system that lets developers build apps for Google Search and Gemini3. The platform extends earlier work on connected apps within AI Mode, though Google noted that building an app does not guarantee it will surface to users.
Ads in AI Mode will be labeled as "Sponsored," and Google said it will continue testing formats designed to keep advertising relevant. The international expansion comes as Microsoft, another major AI spender, reported a capex miss blamed on data center delays during the same earnings cycle[2].