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Alphabet shares fell 12.6% and Reddit shares fell 15% on the same day, as investors reacted to AI-related costs and changes in search. Google said its AI Mode earns less than traditional search, while Reddit reported meaningfully lower search traffic and warned daily users could decline by a low double-digit percentage in the fourth quarter. The reports point to a tension in the web’s changing search economy, though the longer-term effects remain uncertain.
Alphabet shares fell 12.6% and Reddit shares fell 15% on the same Thursday after the companies’ results and outlooks exposed a shared strain from changing search habits. Google said its AI Mode generates less revenue than traditional search, while Reddit reported a meaningful drop in search traffic and said 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 source report, making it the company’s worst day as a public company. Investors were concerned about the scale of its AI infrastructure spending: Alphabet planned up to $205 billion in capital expenses for the year and indicated it would spend more in 2027. The company also reported negative $9 billion in free cash flow, with the decline accelerating from the previous quarter.
On an earnings call, Google Chief Business Officer Philipp Schindler said increased use of AI Mode was one reason search revenue growth had slowed despite rising query volume. Google Search and related advertising still generated $63.35 billion in revenue, up 12% year over year, but that growth was slower than the 19% reported in the first quarter and 17% in the second.
Reddit said search traffic had fallen meaningfully and warned that its daily users might decline by a low double-digit percentage in the fourth quarter. CEO Steve Huffman said the company would push more visitors to log in, arguing accounts improve ad targeting and engagement and help protect Reddit’s data. The source does not provide a precise traffic decline or a quantified user forecast.
AI Search Pressures Both Platforms
The companies occupy different positions in the same web-search relationship. Google organizes and monetizes discovery; Reddit has benefited when that discovery sends visitors to its discussions. The earnings disclosures suggest that AI search may alter the exchange: users can get answers without visiting publishers, while platforms may see weaker monetization or less incoming traffic.
For advertisers and publishers, the immediate issue is whether AI-driven search can generate comparable commercial value and referrals to conventional search. Schindler’s remarks are evidence that Google sees a revenue difference between its own search formats, while Reddit’s traffic warning shows potential consequences for a major destination that has received search referrals. These disclosures do not establish that AI alone caused either company’s results or share decline.
The market reaction also reflects distinct concerns. Alphabet investors were weighing infrastructure costs and cash flow alongside search growth; Reddit investors were responding to traffic trends and the user outlook. The shared theme is exposure to a changing search ecosystem, not proof that the two businesses face identical risks.
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The Search Referral Bargain
For years, Google indexed publishers’ pages and sent visitors to them, while earning advertising revenue from search. Reddit became a major beneficiary as Google increasingly featured forum discussions in results. The source report says Reddit later restricted bots’ access to its forums and that Google reportedly paid $60 million a year to license Reddit data.
Google has also increasingly kept answers on its own results pages. Its AI Overviews appear above conventional results, while AI Mode offers a separate conversational search experience. Google has previously argued that AI answers encourage broader searches and can lead to higher-quality clicks; the source report says executives had described Overviews as monetizing about as well as traditional search. Schindler’s comments drew attention because they indicated a weaker revenue outcome for AI Mode.
Reddit’s proposed login push is a response to its own traffic and business concerns. Huffman said logged-in users provide more signals for ad targeting and tend to engage more, while accounts could also help Reddit control access to its data and respond to regulations. That plan changes how visitors can access the site, but its effects have not yet been established.
“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
How Lasting Is the Search Shift?
The disclosures do not establish how much of either stock’s decline was caused by AI search rather than other earnings concerns. Alphabet’s planned spending and negative free cash flow were prominent investor worries, while the source gives no exact figure for Reddit’s search-traffic loss. Reddit’s possible fourth-quarter daily-user decline is a forecast, not a reported outcome.
It is also unclear whether AI Mode’s lower monetization will persist, whether users will adopt it at a rate that offsets weaker revenue per use, or whether Reddit’s login policy will slow traffic further or improve engagement and advertising. Google’s broader claims about AI search and high-quality website clicks remain contested by the evidence described here; one day of market movements cannot settle the longer-term effect on the web.
Watching Search and User Metrics
The next evidence will come from future company updates: whether Google’s search revenue growth and free cash flow respond to its AI investment, and whether management provides more detail on monetization across AI Mode and traditional search. The source does not identify a specific date for the next milestone.
For Reddit, investors will watch the fourth-quarter daily-user figures and the effect of encouraging account creation on traffic, engagement and advertising. Until those results are reported, the projected user decline and the business benefits of the login push remain uncertain.
Key Questions
Why did Alphabet and Reddit shares fall?
The source report links Alphabet’s 12.6% decline to worries about AI infrastructure spending, cash flow and slower search revenue growth. Reddit fell 15% after reporting lower search traffic and warning that daily users might decline in the fourth quarter. The available information does not assign each share move to a single cause.
What did Google say about AI Mode?
Google Chief Business Officer Philipp Schindler said increased use of AI Mode was one reason search revenue growth slowed despite more queries. He said AI Mode makes less money than traditional search.
What is Reddit planning to change?
CEO Steve Huffman said Reddit would increasingly encourage visitors to log in. He said accounts can provide more ad-targeting signals, support engagement and help the company control access to its data. The source does not specify exactly when or how broadly the change will be applied.
Does this prove AI search is harming publishers?
No. The disclosures show that Google says AI Mode monetizes less than traditional search and that Reddit reported declining search traffic. They do not establish that AI alone caused Reddit’s traffic change or prove the overall effect on publishers across the web.
Source: platformer.news
