Google Search Tops $63B Tests AI Ads

Alphabet has reported a strong finish to 2025, with Google Search revenue rising 17% year-on-year to $63.07 billion in Q4. This growth contributed to the company surpassing $400 billion in total annual revenue for the first time, highlighting the continued dominance of its search business and the growing impact of artificial intelligence (AI) on user behaviour.

CEO Sundar Pichai said on the earnings call that AI-powered features are changing the way people interact with Search. “Once people start using these new experiences, they use them more. In the US, daily AI Mode queries per user have doubled since launch,” he explained. Indeed, queries in AI Mode are now approximately three times longer than traditional searches, with many prompting follow-up questions and deeper engagement with Google’s services.

Monetising AI Mode

Google is beginning to explore new ways to monetise these longer, AI-driven interactions. Chief Business Officer Philipp Schindler outlined early experiments, including placing ads directly below AI responses and piloting Direct Offers, a programme that allows advertisers to present exclusive deals to shoppers who are ready to purchase. Selected merchants may also allow users to complete checkout directly within AI Mode, streamlining the path from query to conversion.

Schindler noted that these longer, more complex AI Mode queries are creating additional advertising opportunities that were previously difficult to monetise. Google’s AI understanding of intent allows for more precise ad targeting, particularly on searches that span multiple topics or require nuanced context. This represents a significant shift in how Google plans to capitalise on AI-driven search behaviour.

YouTube Revenue and Other Divisions

While Google Search thrived, YouTube ad revenue fell slightly short of expectations. It rose 9% year-on-year to $11.38 billion, below analyst predictions of $11.84 billion. Schindler attributed this to the absence of election-related advertising, which boosted revenue in Q4 2024, and to the increasing number of users subscribing to YouTube Premium, which reduces ad impressions but contributes to overall subscription revenue.

Google Cloud was another standout performer, posting 48% growth to $17.66 billion. To fuel continued growth and AI innovation, Alphabet announced plans to invest $175 billion to $185 billion in capital expenditure in 2026, nearly double what it spent in 2025. These investments signal further expansion of AI-powered products and services across Google’s ecosystem, particularly in Search and cloud infrastructure.

Search Growth and AI Behaviour Trends

Looking at the year’s growth trajectory, Google Search steadily accelerated its revenue expansion throughout 2025, increasing from 10% in Q1 to 12% in Q2, 15% in Q3, and finally 17% in Q4. This steady acceleration is closely tied to AI integration, which encourages users to spend more time on the platform and engage with content in new ways.

Pichai emphasised that AI features are not just changing query length but also the depth of user engagement. Longer AI Mode queries provide opportunities for more complex follow-up questions, which in turn creates additional ad inventory. Schindler called this “an expansionary moment” for Google Search, noting that AI has increased the platform’s ability to deliver ads on queries that were previously challenging to monetise.

Impact on Advertisers and Marketers

For advertisers, these developments represent both opportunities and challenges. Direct Offers in AI Mode can help brands reach users at the exact moment they are ready to purchase, while checkout integration allows for a seamless transaction. However, marketers will need to monitor analytics closely to understand how AI Mode affects traffic patterns and referral sources, particularly as AI-driven searches may alter how users navigate to other websites.

The longer, more detailed AI Mode searches could lead to higher engagement and improved ad performance, but businesses will need to balance these benefits against potential changes in traditional web traffic. Google maintains that AI features expand user activity rather than cannibalise it, but real-world monitoring will be essential for advertisers and site owners.

Looking Ahead

Alphabet’s Q4 results provide a clear signal that AI is no longer an experimental feature—it is a fundamental driver of user behaviour and revenue growth. The company’s investments in AI and infrastructure suggest that more innovations will follow in 2026, with further enhancements to AI Mode, advertising integration, and monetisation strategies.

As the AI landscape evolves, businesses and marketers will need to adapt to new user patterns, longer search queries, and AI-driven ad placements. Google’s strategy indicates that AI Mode is creating a wealth of new opportunities while reshaping how users interact with search and digital content.

Overall, the results from Q4 2025 underscore that AI is not just enhancing Search but transforming it, providing Google with both immediate revenue growth and long-term potential for innovation across its ecosystem.