For the First Time, Search Brings In Less Than Half of Google’s Revenue

Alphabet’s latest quarter marked a first: search was no longer the company’s biggest revenue bucket by share. Total revenue hit $127.6 billion, up 25 percent year over year, and “Google Search & other” accounted for $63.4 billion, or 49.7 percent.

The rest came from the parts of Google that used to feel secondary: cloud, YouTube, subscriptions, hardware and the ad network. Google Cloud did most of the heavy lifting. Revenue there jumped 103 percent to $30.7 billion, helped by demand for AI infrastructure and business AI tools. Alphabet also said sales of its own AI chips, TPUs, are now a “meaningful contributor” to growth, and cloud chief Thomas Kurian said nearly 100 customers use them. The cloud backlog is $561 billion, with just over half of that expected to become revenue over the next two years.

Search is still growing, but much more slowly than before. Revenue rose 12 percent, compared with 17 percent in the second quarter and 19 percent in the first. Compared with the previous quarter it was basically flat. Alphabet pointed to currency effects, weaker ad spending from retailers in Asia-Pacific, and a strong prior quarter boosted by the soccer World Cup. It also said AI Mode in Search is growing quickly but brings in less ad money per query. Sundar Pichai, meanwhile, said search queries are growing at their fastest pace in five years.

The tension in the numbers is obvious. Search no longer dominates revenue, yet it still drives profit. Google Services, which includes search, YouTube and subscriptions, generated $39.2 billion in operating income, versus $11.1 billion for Google Cloud. Investors still punished the quarter anyway: the stock fell about 10 percent after hours, net income slipped to $26.2 billion, and Alphabet kept spending heavily on the AI buildout, including $51.4 billion in data centers, servers and chips during the quarter.

And there is a second story hiding under the headline: Google is trying to turn cloud into a giant business fast enough to offset a search engine that is maturing and, in some corners, getting squeezed by AI. The irony is delicious in a very corporate way: search still pays the bills, while cloud gets the victory lap.