Google’s AI search wiped $500bn off its value as ads fell away

Google’s latest earnings reveal that its own AI search rollout has hit ad revenue hard. After introducing AI-generated answers in its main search product, Google’s value dropped by $500bn and negative cash flow reached -$9.06 billion. BBC and Ars Technica both report that investors responded by pushing Google’s stock to a six-month low.

Why it matters

Google’s main business has always depended on selling ads alongside search results. With the new AI summaries, users get direct answers, which means fewer clicks on the ads that drive Google’s revenue. Ars Technica reports that this change pushed Google’s negative cash flow to -$9.06 billion. The $500bn value drop, reported by BBC, shows just how much this unsettled investors.

Running AI at Google’s scale is expensive. The company now faces a tradeoff between staying ahead in AI and protecting its core ad business. Google and Microsoft have both slowed their AI infrastructure build-outs, as covered in our earlier reporting, which signaled that costs were rising faster than expected. Now, the business model itself is under pressure, not just the infrastructure budget.

Google tries to fix the model with more ads in AI answers

Google told Ars Technica it is responding by placing more ads directly inside AI-generated answers. The company wants to offset the drop in traditional ad clicks by embedding paid results into the new AI interface. This changes the user experience, as ads now appear inside the AI summary rather than just above or beside search results.

It is not yet clear how effective these new ad formats will be, or how users will react. If AI answers become crowded with ads, users may trust them less or use Google less often. If Google cannot restore lost ad revenue, it faces ongoing negative cash flow. Google has not shared figures on how much these new AI ad slots are earning so far.

This approach also puts pressure on competitors. Microsoft and companies like Mistral, who are working on their own AI search and assistant models, will have to solve the same problem. Anyone building an AI-powered service that replaces traditional search must figure out how to make it pay. For more on the risks of open AI models, see our coverage of Mistral’s trillion-parameter release.

What this means if you run a business

If your business relies on Google search ads, expect changes in how those ads perform. As more answers stay on Google, the value of a search ad impression could shift, especially if users get what they need from the AI summary and do not click through. This might raise the cost of each real visit, or change which keywords are worth bidding on.

Google’s new AI ad formats may also be less targeted or less visible than traditional paid links, at least at first. Marketers will need to test new placements and monitor performance closely. If you rely on organic search traffic, prepare for further drops as Google tries to monetise its AI summaries more aggressively.

For companies building AI products, Google’s experience is a warning. The cost of running large-scale AI is not limited to infrastructure. It can also threaten existing revenue streams. Even a company at Google’s scale can misjudge the business impact of a new AI feature, as the numbers show.