The search revenue slump
Alphabet lost $510 billion in market value on Thursday, falling from $3.97 trillion to $3.46 trillion after its third-quarter results missed analyst expectations. I find the 12 percent stock drop particularly telling since search revenue remained flat in the three months ending in September. While total revenue grew 25 percent to $127.6 billion, earnings per share reached only $2.12. This missed the $3.02 consensus projection. Google search growth slowed to 12 percent this quarter, which is significantly lower than the 17 percent growth in the second quarter and 19 percent growth in the first quarter of 2025. Philipp Schindler, Google’s chief business officer, said the "AI mode" earns less revenue because these conversational queries have fewer ads. I think this slowdown in search growth is a direct consequence of consumers using AI chatbots to find answers instead of using a standard search engine. This shift is visible in the net income, which was nearly $9 billion lower than the previous year. Google’s cloud products beat expectations, crossing $30 billion in revenue.
The long-term strategy
The company is making a massive gamble on its own technology. Kim Scott, who previously led Google’s advertising business, told the BBC that the company would "rather eat its own lunch than allow someone else to eat their lunch" by letting its own AI summaries impact search revenue. She noted that the firm makes long-term bets on technology even when they hurt the company in the short term. I believe this strategy explains why the company accepts lower ad revenue from Gemini to keep its search dominance. This aggressive spending pattern mirrors the behavior of other tech giants like Amazon and Microsoft. Amazon’s stock fell 6 percent in after-hours trading after the company reported a negative $42 billion cash flow, despite quarterly sales hitting $201 billion. Andy Jassy, Amazon’s chief executive, noted the company spends heavily on computer chips and its Bedrock AI platform to capture future revenue. He mentioned these investments could lead to two businesses that bring in $1 trillion for Amazon. He admitted to financial analysts that it "would be more convenient" to spread these costs over 25 years, but he stated that is not the world we live in. He believes this spending will change the revenue and free cash flow of Amazon. Microsoft saw a less dramatic reaction to its results, as its revenue hit $92.3 billion and its cloud business grew 30 percent to $63 billion. Satya Nadella, Microsoft’s chief executive, said that daily users of the Copilot tool grew by 500 percent from a year ago. Microsoft also spent $5 billion less on AI investments and announced plans to cut thousands of workers to reduce costs. I find the Microsoft data a warning that investors are looking to see where AI value is captured.
Gemini 4 Carbon performance
The technical capabilities of Gemini 4 Carbon provide a way for Google to reclaim its position. This model is an improvement on Gemini 4 Argon and follows a staged release pattern. I find the cybersecurity improvements the most useful part of the update. The model shows a "significant leap" in vulnerability detection and is twice as likely to produce code free of vulnerabilities than Argon. The Chrome team claims the model is 10 times better at generating "high-quality" patches than non-Google models. This is a major gain. It also increased its score by 89 points on the WebDev Arena leaderboard, where it now sits at number four. In several tests, Gemini 4 Carbon outpaced GPT-6 Astra, Claude Opus 5.5, and Claude Fable 5.1, though it beats Argon by only slim margins.
| Feature | Specification |
|---|---|
| Model Name | Gemini 4 Carbon |
| Comparison Model | Gemini 4 Argon |
| WebDev Arena Score Increase | 89 points |
| Vulnerability Score | 2x Argon |
I recommend Gemini 4 Carbon for users needing advanced cybersecurity code analysis. This model makes coding tasks easier.
