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Alphabet shares fell 12.6% after investors focused on rising AI infrastructure costs and comments that Google’s AI Mode earns less than traditional search. Reddit shares dropped 15% after it reported weaker search traffic and warned daily users could decline by a low double-digit percentage in the fourth quarter. The companies’ results point to a shared strain in the web’s search-and-traffic economy, though the long-term effects remain uncertain.
Alphabet shares fell 12.6% and Reddit shares dropped 15% on the same day, after disclosures from both companies highlighted pressure on the web’s search-driven business model. Google said its AI Mode generates less revenue than traditional search, while Reddit reported a meaningful fall in search traffic and warned that its daily users could decline by a low double-digit percentage in the fourth quarter.
Alphabet’s decline erased about $500 billion in market value, according to the Platformer report. Investors were concerned about the scale of Google’s AI infrastructure investment: the company plans to spend up to $205 billion on capital expenses this year and has signaled higher spending in 2027. Alphabet also reported negative $9 billion in free cash flow, with the decline accelerating from the prior quarter. The report described the share-price fall as Google’s largest one-day decline since the global financial crisis.
On an earnings call, Google Chief Business Officer Philipp Schindler said increased use of AI Mode was among the reasons search revenue growth had slowed even as queries rose. AI Mode earns less than traditional search, he said. Google Search and related advertising nevertheless generated $63.35 billion in revenue, up 12% year over year; the report said that growth was slower than the 19% recorded in the first quarter and 17% in the second.
Reddit said search traffic had fallen meaningfully and projected that daily users could decline by a low double-digit percentage in the fourth quarter. Chief Executive Steve Huffman said the company would increasingly require people to log in. Reddit’s stated reasons include improving ad-targeting signals and engagement, protecting access to its data, and adapting to regulations. The company’s shares fell 15% after its quarterly results, according to Platformer.
AI Search Tests the Web’s Traffic Deal
The parallel declines expose different sides of the same change. Google is shifting answers onto its own AI-powered search surfaces, but the report says those interactions currently earn less than traditional search. Reddit depends partly on visitors arriving through search, and its results suggest that channel has weakened. If people get answers without clicking through, publishers and online communities may receive less traffic even as search companies invest heavily in AI.
The disclosures do not establish that AI Mode caused Reddit’s traffic decline or that the two companies’ results share a single cause. They do, however, challenge the assumption that AI answers will automatically benefit both search businesses and the sites whose material appears in results. Google’s search operation remains large and growing, while Reddit is responding by trying to build more direct, logged-in relationships with users.
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From Search Referrals to AI Answers
The earlier web bargain was straightforward: publishers let Google index their pages, Google sent users to those pages, and both sides earned money from advertising. Platformer described Reddit as a major beneficiary of search referrals, particularly after Google began surfacing forum discussions more prominently. The report said Google reportedly agreed to pay Reddit $60 million a year to license its data after Reddit restricted access to bots that had been scraping its forums.
Google had already been moving toward keeping users on its own results pages, first with direct answers and later with AI Overviews and AI Mode. The report notes that Google executives said a year earlier that AI Overviews monetized about as well as traditional search. Schindler’s comment about AI Mode points to a distinction between the two products, rather than establishing that all AI search features earn less.
Platformer also cited a U.S. antitrust ruling finding that Google had used its position to create an illegal monopoly in the advertising market. The report said the ruling left much of the company’s market power intact. That legal backdrop matters to the online advertising ecosystem, but it does not by itself explain the stock moves described here.
“Increased usage of Google’s AI Mode is hurting the company because it makes less money than traditional search.”
— Philipp Schindler, Google chief business officer, as quoted in the Platformer report
How Lasting the Search Shift Will Be
The disclosures do not show how much of Reddit’s traffic decline came from Google, AI features, other search engines, or broader changes in user behavior. Reddit’s projected low double-digit daily-user decline is an outlook for the fourth quarter, not a reported result. The source does not provide a precise traffic figure, comparison period, or breakdown by referral source.
It is also unclear whether Google’s AI Mode can improve its advertising returns as usage grows, or how its monetization compares across search categories. Alphabet’s planned spending and negative free cash flow are reported figures, but the material does not establish how much each factor contributed to the share-price fall. The same-day stock moves show investor concern, not proof that the companies’ business models are permanently weakening.
Results Will Test Both Strategies
Investors will look for further detail from Google on AI Mode’s revenue per query, its effect on search growth, and the returns expected from the company’s infrastructure spending. Alphabet’s planned capital expenditure and its promise to spend more in 2027 make those questions relevant beyond this quarter.
Reddit’s next reported results should show whether its efforts to increase logged-in use can offset weaker search traffic and whether the projected fourth-quarter daily-user decline materializes. Until those figures are available, the extent of the traffic shift and its financial effect on Reddit remain unsettled.
Key Questions
Why did Alphabet shares fall?
Platformer linked the 12.6% decline to investor concern about Google’s planned AI infrastructure spending and comments that AI Mode earns less than traditional search. The report does not quantify how much each concern contributed.
Why did Reddit shares drop?
Reddit shares fell 15% after the company reported meaningfully lower search traffic and said daily users could decline by a low double-digit percentage in the fourth quarter. The material does not give a detailed breakdown of the traffic change.
Does Google say all AI search earns less than traditional search?
No. The report attributes the lower-earnings comment specifically to AI Mode. It also says Google executives had previously described AI Overviews as monetizing about as well as traditional search.
Why is Reddit encouraging users to log in?
CEO Steve Huffman said logged-in users can improve ad targeting and engagement. He also cited protecting access to Reddit’s data and adapting to regulations.
Is AI responsible for Reddit’s search traffic decline?
The available report does not establish that. It records Reddit’s traffic warning and Google’s AI Mode revenue comments, but gives no evidence isolating AI’s role in Reddit’s decline.
Source: platformer.news
