Key Notes
- Meta’s third-quarter advertising revenue rose 26% to $63.06 billion, compared with 12% growth to $63.35 billion for Google Search and other.
- Google said AI Mode’s lower monetization affected Search growth, while currency movements were the largest driver of the slowdown from the previous quarter.
- Both companies are expanding AI advertising tools while committing hundreds of billions of dollars to broader infrastructure, making long-term returns a separate test.
AI is strengthening the advertising business that pays for Meta’s ambitions. At Google, it is also changing how the company’s most important ad product works. The latest earnings show two businesses still growing, but with different challenges in turning better AI into more revenue.
Meta ad revenue rose 26% year over year to $63.06 billion in the third quarter, according to its October 21 results. Google Search and other revenue grew 12% to $63.35 billion, as reported on October 28. Meta’s growth rate was more than twice as fast, and its ad business was nearly the same size as Google’s Search category.
That comparison has limits. Google’s figure excludes YouTube advertising, which generated another $11.21 billion, and its ad network. Nor do the revenue totals reveal how much growth AI caused. What they show is a widening difference in the performance of two major businesses as AI becomes more deeply embedded in online discovery.
Meta Can Improve the Business It Already Has
Meta’s route to revenue is relatively direct: improve the content people see, make ads more relevant and help advertisers build better campaigns. The company reported a 10% increase in ad impressions and a 14% rise in average price per ad across its Family of Apps. Both matter to the revenue outcome; attributing the entire increase to a chatbot would miss most of the machinery behind it.
On its earnings call, Meta estimated that advertisers adopting its AI business assistant’s recommendations generated almost 5% more conversions at the same cost per conversion and spent 9% more than similar non-adopters. The company also said nearly 10 million advertisers used at least one of its generative AI creative tools during the quarter.
Those are company-reported results, rather than guaranteed returns for every advertiser. They nevertheless illustrate the commercial logic: if software helps a business achieve its objective more efficiently, it can give that business a reason to increase spending. Meta can sell that improvement through a large advertising platform it already operates.
Muse, the personal AI assistant, adds another possible route into product discovery. As our shopping-agent coverage examined, helping someone find an item and completing a purchase involve different permissions and responsibilities. That emerging product should also be distinguished from the established recommendation and advertising systems producing revenue today.
Google’s Challenge Is What a Search Is Worth
Google’s problem is more complicated than people simply abandoning Search. Sundar Pichai said in his prepared remarks that year-over-year query growth was the strongest in five years, including growth in commercial queries. AI can encourage people to ask more questions while changing the formats in which advertisers reach them.
The tension appeared in Alphabet’s call transcript. Chief business officer Philipp Schindler said AI Mode’s lower monetization contributed to the slowdown in Search revenue growth from the second quarter. He also identified foreign exchange as the largest driver of that deceleration, alongside changes in retail advertising and the timing of World Cup-related spending.
That distinction matters. Slower revenue growth is not falling revenue, and weaker monetization of a new interface does not establish that every AI query displaced an existing paid search. Google says most AI Mode queries are incremental. It is expanding advertising within AI Mode and AI Overviews as it tries to turn that additional activity into commercial value.
The broader Search redesign we covered brings more interactive and agent-driven experiences into the product. For advertisers, the practical question is where a relevant offer fits when a user is having a conversation or delegating a task. For Google, the challenge is to make those placements useful enough that a better answer and a sustainable business can develop together.
The Advertising Gains Still Have to Support the Buildout
The revenue opportunity comes with an enormous investment requirement. Meta expects 2026 capital expenditures of $135 billion to $145 billion, including finance-lease principal payments. Alphabet’s guidance is $195 billion to $205 billion. These are company-wide spending plans, covering infrastructure used across their businesses, rather than budgets solely for advertising AI.
Meta reported negative quarterly free cash flow of $2.12 billion even as its ad sales grew strongly. Alphabet has a substantial additional growth engine in Google Cloud, whose quarterly revenue rose 103% to $30.71 billion. Faster ad growth alone therefore gives an incomplete picture of either company’s finances or the eventual return on its infrastructure.
The next test is commercial performance over time: whether advertisers keep increasing investment, whether AI search earns more from its growing usage and whether the required computing costs remain manageable. Meta has a clearer near-term example of AI reinforcing an existing revenue engine. Google is trying to improve that engine while changing how users interact with it.
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