WASHINGTON, D.C. — Google’s shares slumped to a six‑month low on Tuesday, wiping roughly $500 billion off the company’s market value after the tech giant disclosed that its AI‑driven search summaries were cannibalising ad sales, a development that rattled investors and analysts alike.

In its quarterly earnings release, Alphabet said the new “AI‑summarised” results reduced click‑through rates on traditional text ads by an estimated 12 percent, translating to a $3.2 billion shortfall in advertising revenue for the quarter. The loss pushed the company’s projected full‑year ad earnings down to $190 billion, below Wall Street’s consensus of $197 billion.

Enterprise customers have embraced Google’s AI tools at a rapid pace, with Google Cloud reporting a 28 percent year‑over‑year increase in AI‑related contracts. Yet the same technology that powers internal productivity suites is now reshaping the public search experience, prompting rivals such as Microsoft’s Bing and emerging players like Anthropic to vie for market share in a newly competitive AI search arena.

“The market is reacting to the reality that Google’s own AI is eroding a core revenue stream,” said Sarah Patel, senior equity analyst at Morgan Stanley. “Investors are concerned that the company may need to redesign its ad model or find new monetisation pathways, which could take time and capital.” Google’s chief financial officer, Ruth Porat, acknowledged the challenge, noting that the firm is “exploring premium ad formats and partnership opportunities to offset the impact of AI‑driven search changes.”

Looking ahead, Google plans to roll out a hybrid ad product that blends AI‑generated snippets with sponsored content, aiming to restore advertiser confidence while preserving the user‑experience gains of its summarisation feature. Analysts will watch quarterly ad‑spend trends closely, as the balance between innovation and revenue stability remains a pivotal concern for the tech titan.

Key Takeaways

• AI search summaries cut ad click‑through rates by about 12 %, costing roughly $3.2 billion in quarterly revenue.
• Enterprise AI adoption on Google Cloud rose 28 % YoY, intensifying the competitive pressure from Microsoft and Anthropic.
• Google is testing hybrid ad formats to recapture lost revenue while maintaining AI‑enhanced search experiences.

Google’s next earnings report will be a critical barometer of whether its hybrid ad strategy can stabilise revenue streams without compromising the AI features that have become central to its product roadmap.