The bombshell comments drove Alphabet’s stock price down as much as 9% in intraday trading, although they have subsequently clawed back some of those losses and are currently about 6% lower than before Cue’s testimony.
Investors have been worried that AI chatbots will eventually displace Google Search, which accounts for 55% of Alphabet’s overall revenues, and is believed to also account for a much larger percent of the company’s profits. (We don’t know exactly how much, because Alphabet does not break out its profits by the same segments for which it reports revenue.) But trying to tease out exactly how AI competition is impacting Google, and which rivals might be gaining at Google’s expense, is tricky.
How quickly these trends may eat into Google’s revenues is unclear. In the first quarter, Google Search revenues grew 7%—which was about half the rate at which those revenues expanded throughout 2024. But they are still growing.
Philipp Schindler, Alphabet’s senior vice president and chief business officer, told investors on the company’s first quarter earnings call last month that Alphabet has seen “monetization at approximately the same rate” since the launch of AI Overviews. But he also pointedly declined to answer questions about click-through rates since the introduction of the AI capsule answers. And, the next morning, Alphabet’s 10Q SEC filing revealed that the growth of its “Google Search & Other” paid clicks had slowed to 2%, down from a 5% growth rate throughout 2024.
JPMorgan analyst Doug Anmuth, in an otherwise sanguine take on Cue’s testimony, noted that “we believe AI Overviews are a factor in slower paid click growth as they likely have lower ad load & more relevant natural search results.” Two recent studies from marketing firms that help companies increase their presence on search engine results have indicated big fall-offs in click-through-rates—as much as 35%—for AI Overviews compared to traditional search.
