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Alphabet shares fell 12.6% on the day the company discussed heavy AI infrastructure spending and said AI Mode earns less than traditional search. Reddit shares fell 15% after it reported meaningfully lower search traffic and warned daily users could decline by a low double-digit percentage by the fourth quarter. The disclosures point to a shared strain: AI-driven search may keep people on platforms while reducing the traffic or revenue those platforms once helped generate for others.
Alphabet shares fell 12.6% on Thursday after investors reacted to the company’s planned AI spending and an executive’s account that Google’s AI Mode generates less revenue than traditional search. Reddit shares dropped 15% later that day after the company reported a meaningful decline in search traffic and warned daily users could fall by a low double-digit percentage by the fourth quarter. The two declines highlight a common pressure point: AI is changing how people use search, with consequences for the companies that sell ads and the publishers that depend on referral traffic.
Alphabet’s planned capital spending of up to $205 billion this year, with even higher spending promised for 2027, was a major concern for investors, according to the Platformer report. The company also reported negative $9 billion in free cash flow, accelerating a decline that began the previous quarter. Alphabet’s stock loss erased about $500 billion in market value, according to the report; it described the fall as the company’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 despite rising query volume. Search and related advertising revenue still grew 12% to $63.35 billion, but growth had been 19% in the first quarter and 17% in the second, the source reported. The report said the figure was essentially flat compared with the previous quarter.
Reddit said search traffic had fallen meaningfully and forecast that daily users might decline by a low double-digit percentage by the fourth quarter. Chief Executive Steve Huffman said the company would increasingly require people to log in to use the site. He cited advertising signals, engagement, protection of Reddit’s data and adaptation to regulations as reasons for the policy shift.
AI Search Tests the Referral Economy
The disclosures matter because they show different sides of the same shift. Google is bringing more answers into its own search experience, but its business officer said AI Mode earns less than traditional search. Reddit, meanwhile, says it is receiving less search traffic and is responding by making access more dependent on user accounts. Those statements complicate the argument that AI-powered search can benefit the wider web by generating more or better visits.
The effects reach beyond the two companies. Publishers and online communities have relied on search engines to introduce audiences to their material, while search companies have made money from advertising around results. If AI features answer more questions without sending users onward, that arrangement may weaken. The source does not establish that AI alone caused Reddit’s traffic decline or Google’s slower revenue growth, but both companies’ disclosures put pressure on the existing model.
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A Changing Search Bargain
For years, Google’s search engine indexed publishers’ pages and sent visitors to them, while Google sold ads alongside search results. The report describes a gradual move toward keeping people on Google’s own pages, where answers can appear directly in results. AI Overviews and the separate AI Mode extend that approach. Google has argued that AI answers can prompt deeper searches and higher-quality website visits; the earnings-call comments reported here point to a possible revenue trade-off for AI Mode.
Reddit benefited from Google search visibility as forum discussions became prominent in results. The Platformer report says Google reportedly agreed to pay $60 million a year to license Reddit data after Reddit restricted automated scraping. That history helps explain why Reddit’s recent search-traffic decline and its new push for logged-in users have wider significance for access to online discussions and data.
“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 Much AI Drives the Declines
The source does not quantify how much Google’s AI Mode contributed to the slowdown in search revenue, or how much of Reddit’s traffic decline resulted from AI features rather than other changes in search behavior. It also does not provide Reddit’s exact traffic figures, the period used to measure the decline, or a precise estimate beyond the company’s warning of a possible low double-digit percentage decline in daily users by the fourth quarter.
It remains unclear whether Google can improve AI Mode’s advertising returns, whether Reddit’s login policy will reverse its user decline, and how those changes will affect publishers over time. The report’s view that Google may ultimately benefit is analysis, not a confirmed outcome.
Revenue and User Trends Ahead
The next indicators are whether Google’s search revenue growth and free cash flow stabilize as it invests in AI, and whether executives provide further detail about the economics of AI Mode. Reddit’s coming quarterly results should show whether its search traffic and daily-user trends match the warning in its shareholder letter, and how widely its login requirements are applied.
For publishers and other sites, the key measure will be whether search referrals continue to fall as more answers appear directly in search products. The available report does not give a timeline for that broader effect, so its scale remains uncertain.
Key Questions
Why did Alphabet shares fall?
The Platformer report attributed the selloff largely to investor concern about Alphabet’s planned AI infrastructure spending and its negative free cash flow. An executive also said AI Mode earns less than traditional search.
Why did Reddit shares fall?
Reddit reported a meaningful fall in search traffic and warned that daily users could decline by a low double-digit percentage by the fourth quarter. The report does not give a more exact traffic figure.
What do the two companies’ disclosures have in common?
Both point to changes in search behavior affecting established business models: Google described weaker monetization from AI Mode, while Reddit reported lower traffic from search.
Is AI confirmed as the cause of Reddit’s traffic decline?
No. Reddit reported lower search traffic, but the source does not establish that AI was the sole or direct cause of the decline.
What happens next?
Investors will watch Google’s search revenue and cash flow, as well as Reddit’s traffic and daily-user figures in future results. The companies’ disclosures do not yet establish how lasting the effects will be.
Source: platformer.news
