Google grew revenue 22% YoY and operating income 30%, with growing margins. Search revenue still growing 19%, an acceleration vs YoY growth this time last year.
Cloud grew revenue 63%. Cloud income up from $2.2b Q1’25 to $6.6b Q1’26.
Have you looked at the results for any commercial query, something like [sofa beds] or [hard drives]? It is basically 100% ads. Anything where the user is intending to spend money, they show only ads, and have all the top producers in the world bid against each other for who gets featured, and Google captures essentially all surplus value in the transaction.
My wife is an investor, and one of her portfolio areas is pharmaceuticals. A couple of portfolio companies have reported that it's becoming basically impossible to make any money off of a new product, because you need to advertise it to reach the customer, and Google will skim all the excess producer surplus off as you compete with other startups serving the same market.
It's basically the perfect business model. They own the path to the consumer, which means they own the economy.
I'd also recently hired someone out of Google Search, and they said that the only queries that "legacy" (non-AI-mode) search cares about are commercial-seeking queries, and the only metric they optimize for is ad conversions on those. It literally is thousands of people whose only job is to get you to click more ads.
The open decentralized internet of the 2000s was one of the greatest common goods in human history. It makes me incredibly sad to see it destroyed so quickly. The niche blogs and forums that still exist are still incredibly useful when I stumble on one researching a niche topic, but I know their days are numbered with search traffic rapidly going to zero.
Maybe in the future something comparable will be invented and protected. No harm in dreaming a little I guess.
Doesn't even have to be a query where you intend to spend money, I can't tell you the amount of times I look something up wondering if it exists or to learn more about it and it tries to sell me something
This is partially why search is doomed. Sure LLMs are overtaking search, because search has been enshitified to the point you need an LLM to even get thr answer you’re looking for.
I keep thinking how often LLMs are used to “solve” problems we created.
“Meeting starts at 3” gets fed into an LLM to turn it into a 3 paragraph email, only to be summarized by a different LLM on the other email client end as “Meeting starts at 3”. What a waste.
Is there some writing on the wall? In the future if LLMs are more efficient and eventually commoditized, needing less infraestructure to be run (think on-device as chip efficiency increases).
Apple can eventually just make their own, and provided they don’t benefit from the Google partnership anymore, who will need a search engine aside from Android and PCs?
> In the future if LLMs are more efficient and eventually commoditized, needing less infraestructure to be run (think on-device as chip efficiency increases).
You speak as if this is given. Sure, LLMs are gonna get effective but frontier ones are always going to be hosted.
Also, on-device LLMs are gonna have a 'cutoff' for training data. You cant ask a gpt-oss4 about "Who won Arsenal x Athetico Madrid game". It has to go to the internet, and do the 'search'. You certainly cant ask the local model "What was Google's Q1 2026 earnings".
The self-hosted / on-device LLMs are going to do a lot, but not all and the moment 'search' is involved, people will reach for Google.
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Lots of commercial queries need to be 'fresh' ("Build me an itinerary for Paris"). While a self-hosted LLM can do it, you might not want to trust it, because its info might be stale.
I encourage you to go beyond group think (HN is guilty of that) and really evaluate your position is actually valid or not.
Non-commercial queries are basically a loss-leader for Google. They don't care about them, except that they keep people in the habit of Googling things whenever they need information, which is critical for the whole business model to work. That's why ChatGPT was such a threat: for a while it looked like people might get out of the habit of Googling things and instead just ask ChatGPT, which would've been disastrous. But they seem to have headed it off with Gemini and AI mode. I was just researching something new today, and while I felt like Claude gave slightly better responses, AI mode gave more convenient responses, with direct links and browser integration.
This is why commoditized LLMs aren't a threat. If it's commoditized, people just go to the one which already fits their habits, which is AI mode. And they don't charge anything anyway, so competing on price doesn't work.
New computing devices that don't default to Google Search are a threat. But that's why Google funded Chrome, and Android, and paid Apple billions to be the default search provider in Safari and iOS, and paid Mozilla billions to be the default search provider in Firefox. As long as the results for non-commercial queries aren't actively bad, it'll likely be hard to convince people to switch away from them, particularly given existing habits.
If I had to list the biggest threats to Google's stock price, I'd put them as:
1. A global macro downturn. Google's stock has been pretty macro-sensitive since COVID, because as the tollkeeper to the economy, their revenues directly depend on how many economic transactions there are. If say the Straight of Hormuz crisis results in stagflation, even if it's stagflation in Asia and Australia and Europe rather than the U.S., Google's going to feel it. You even saw that with the ~20% swoon in the early days of the crisis.
2. Dead Internet Theory. If people just give up on the Internet because it's boring or not good for their kids or filled with bots or just not useful, and return to their local communities, this is also the end of Google. There've been some moves in this direction (eg. we're raising our kids to socialize in person with neighbors instead of going online, and many teenagers today think the Internet is decidedly Not Fun), but it also needs to be much more widespread, and get around the fact that many niche products are only available online.
3. Internal decay. I'm an ex-Googler, still have a couple of (increasingly disenchanted) friends there, though many of my friends have retired or left in the last few years. It is a shitshow inside, with a mess of perverse incentives, sometimes incompetent executives, and employees who don't care and are just phoning it in while the stock price goes up. I'd still get questions on code I wrote in 2010, from teams in Bangalore who were just taking over the legacy search stack, who would ask me things because I was literally the only one left at the company from when the code was written and I'd be like "How the hell should I know? I left this project 15 years ago, left the company, haven't worked on Search since 2014, had several other positions, came back, several billion lines of code has been written on top of it since then, still don't work on Search nor do I actually write code anymore, no I can't answer whether this code is important or whether anything will break if you get rid of it." Particularly now that ~75% of the code at Google is written by AI, there's a decent chance that somebody or some AI will introduce a change that breaks the golden goose, it won't be caught until several million more lines of AI-generated code have been checked in on top of it, and that'll be the end of the fabulous machine known as Google. Reportedly this is what happened to Twitter DMs, they used AI to check in some code that broke the feature, nobody knew how to get it working again, and so they just unlaunched it.
I'd be both saddened and wryly amused if it was #3. I can just imagine the day: first the 500 server errors whenever you went to do a Google Search, then the frantic denials that there is a problem, the poor SREs that would be working overtime without any idea how to bring the system back, the pushes toward other projects, the Wall Street damage control, followed by the stock market crash as people realized it wasn't coming back. Imagine how much your habits would have to change if you couldn't access Google: a lot of people get to all their favorite websites through navigational searches.
It'd have to be a major black swan, though, because there are many layers of canaries and metrics checks and rollbacks and backups in place. I think the issue now is that an increasing number of Googlers don't realize why these are important, but Search was built for robustness.
IMNSHO there is actually a profound economic insight in there, which is that you will face a drag on economic activity whenever a private party owns a portion of the path to the consumer. Think of the path to the consumer in say the 1880s: you went to the local general store, you met the vendor in person, you handed over cash, you got the goods. Not many areas where a third-party could interpose themselves to collect tolls; maybe the general store owner could, and many of them ended up quite locally wealthy, but their profits were capped by your ability to go to the next town over.
Now think about today. You search on Google and they run an auction to charge the vendor for getting their products discovered. You go to their website, but their website needs to be protected by CloudFlare from all the people who would take it offline. You buy the product with your Visa, which takes their ~1.6% merchant fee. They sell it with Stripe, which takes their 2.7% fee. You pay shipping and handling for UPS or FedEx to deliver it. Local, state, and federal governments all take tax out of this. Increasingly we're getting national-level shakedowns like Iran charging tolls for the Straight of Hormuz now.
Note that it was similar in olden times whenever one party could control the flow of goods between producer and customer. Sea merchants made huge profits in the 1500-1600s. Standard Oil got to be huge with its control of the distribution infrastructure for oil.
European governments have actually woken up to this with passage of laws like the DMA, but the American government has taken the other tack and decided that if life is a massive shakedown it's going to get in on the extortion business.
I'll explain, because it is true that I'm using "producer surplus" in a non-standard way, but I'm doing it to illustrate a specific point about how Google's business model works and why it is so profitable.
Normally, in an Econ 101 supply/demand model, you have an upward-sloping supply curve indicating how many units of some commodity a producer is willing to sell at a given hypothetical price, and you have a downward-sloping demand curve indicating how many units of some commodity a consumer is willing to buy at a given hypothetical price, and the point at which they meet is called the "market clearing price" where supply and demand are in balance. The area above the supply curve and below the market-clearing price is called the "producer surplus" [1], the amount of extra money the producer gets from the gains of trade. Very roughly, you can think of it as operating profit, though it's not quite the same thing because operating profit is a real tangible dollar amount while the supply curve is largely a hypothetical.
The way Google works is that it comes in for each individual transaction and effectively tells the advertiser "So you have a product or service that you'd like to sell? How much is it worth to you?" It runs a second-price VCG auction [2][3] to determine which of the available ads are shown to the user. Why second-price? Because an ordinary first-price auction incentivizes users to bid less than their true willingness to pay, because they know that if they win the bid, they will have overpaid. Same issue as buyer's remorse in real estate transactions: you know that if you won the bid, it was because nobody else thought the house was worth as much as you did. With a VCG auction you're only paying the marginal harm to the next bidder of winning the auction, so you have an incentive to bid your true valuation. And this is why I used the term "producer surplus" in the original post: it's to capture how Google effectively elicits from each advertiser the maximum amount that the transaction is worth to them, which if they're bidding rationally is the difference between their reservation price and the price they'll receive from the transaction, i.e. the producer surplus.
This also demonstrates where I've been playing fast and loose with the terminology. The price a VCG auction participant pays is not actually their bid, it's the marginal harm caused to other participants (basically the sum of all bids except the advertiser, minus the sum of bids of the other winners). But in a fairly competitive market, one with multiple producers who all face roughly the same cost structure, you'd expect that this quantity converges to the advertiser's actual bid, leading to a condition where Google has actually captured the entire producer surplus and maximized its revenue.
[3] Technically, it's a modified VCG auction, because the actual ranking score is a machine-learned function that also includes factors like "What's the likelihood the user is going to click on this ad?", "Is this ad spam or malware or illegal?", and "Is there brand damage to us from highlighting this ad?" But from an economics perspective, the only important part is that it's a second-price auction.
Is it the most used LLM because people want to use it, or because it literally can't be turned off aside from an obscure search parameter or using a slur in your search
Why would llms replace search? It was a crazy take in 2023 and is still one today. Suppose there are no search engines and you want to find some headphones. How exactly are you doing this with llms?
Actually no, LLMs (preferably tool-using LLMs that can themselves do web searches and price lookups) are a great way to shop, especially if you're looking in a category and don't know exactly what item you want.
You just say "I want to find some headphones" and it makes you some recommendations. Or it helps you nail down what you're looking for first and then gives you options at various price points. I've found this useful when shopping for cars, computers, tourist activities, and much more.
Bing and google do not give you free and unlimited calls. And of course there are many clients… which harness lets you call bing or google on all devices locally?
As far as the premise goes, people on this very site were saying it. The very parent is surprised search is growing.
For most people Google Search is the LLM they're using.
Another way to think about this is that LLM based search actually grows the entire pie for search and so multiple players can all be growing at the same time.
The real losers are publishers, blogs, forums etc. Instead of traffic going to them that traffic is being turned into more search queries and more LLM responses.
It literally doesn't matter why search revenue is growing. What is observably true is that it is that it is growing, as has it has been, throughout the LLM era.
Absent additional information, no one else can identify the false assumption underlies a strong belief that this should not be case. But something is flying in the face of the facts, and has been for a while. So, yeah, might want to take a look at those priors.
4 top paid search results (take up the entire screen)
AI overview (organic for now?)
3 organic results (below the fold)
2 paid search results
Image results
1 organic result
If I don't run paid ads I don't get leads I rank organically for a lot of the keyphrases I'm bidding on (top 3 results)...organic 0-2 calls a week, paid ads 4-6 calls a week (niche business).
How do you find the place to buy the thing you're looking for?
I just tried asking ChatGPT where to buy a backpack I'm looking for and it just... did a search. It would have been considerably faster to just do the search myself instead of wade through the slop about how "This backpack is hard to find in stock, you'll need to buy it directly from the brand yada yada yada".
I don't follow this stuff too closely, but Cloud growing by 63% seems astounding. It'd be interesting to know how much of that is converting AWS and Azure workloads to GCP.
I have internal knowledge, I am closely affiliated with Google.
Infrastructure and scalability has been and is key, as well as technical expertise still absolutely super top notch.
Let’s put it this way: Google is the only company that knows how to find, store and utilize information beyond a specific narrowing. And I mean it really in the sense of curating, compression, long time storage, load balancing as well as compliance and world wide redundancy with a focus on speed and efficiency.
Under the hood of AI is pure engineering genius. Google might be trashed as the Search Engine giant that only displays ads now, but reconsider.
Why does all AI provider except for Google have massive problems with load time, reach, etc? Apple chose Google mainly because of the infrastructure. They eat everyone for lunch here. And they earned it.
Engineering at Google etc. are still the finest you can read about software engineering at the highest level. It is highly impressive how Google managed to not fall behind OpenAI. Who else was able to join the race? Microsoft? No. Apple? Oh well… Meta etc. won’t get there ever.
I think that Gemini is 3rd behind OpenAI and Claude but mainly because Google being Google, they kind of have no versioning for their AI and therefore the results are pretty much random in quality, less predictable than the others.
But the creativity and tooling like Nano Banana - fantastic.
There you have it. People don’t get that it is the infrastructure the moment they complain about Claude outtakes here.
The reason you don't hear people complaining (esp on HN) is because noone is using Gemini with coding agents. Claude Code, Codex (and IMO OpenCode et al with open weights models) are miles ahead of Gemini CLI/Jules/Antigravity/whatever other coding products Google have.
I noticed early on that Gemini responded multiple times faster than claude and chatgpt do, which is why I use it as my main daily LLM (claude code for coding, gemini for all general queries).
Seconding that, not sure if it's the full take I'd stand behind but the perspective is definitely food for thought and way more thought out than my own.
They did it again in 2024 and then switched to continuous drip of small "layoffs" and encouraging attrition. They have tried various layoff flavors: random, strategic, political, voluntary, and now in their continuous microlayoff era good luck distilling a consistent simple explanation for the day to day decisions of many thousands of managers.
Google has cost-cut their old hiring and performance management processes, and eliminated many perks and benefits that were peculiar to Google. As the unique characteristics of Google as an institution are pared away, it makes sense that they would also adopt the standard approach to layoffs and that is what we have seen since 2023.
Only if you count a single day. If you count yearly Google has not stopped layoffs of "more than a few thousand" since 2023. And I bet some months get above 1000. The big layoff in 2023 was not actually the first time by the way, that was much earlier (there was a wave of office consolidation in the 2010s). Also the 2023 layoff was at least 3 distinct waves.
And constant layoffs very much have the result on morale you'd expect today.
Google is also doing layoffs. They just aren't making the news because they are PA by PA and they are preceded by buyouts. But we've had layoffs every year since 2023.
In the long run, judging from recent incidents such as YouTube monetization suspensions, I do not think Google is good for the consumer web experience or for content creators. I also think SEO search has almost completely broken down.
In particular, the flow that used to support content creators through Google Search has been damaged. Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
That said, I think Search is still making a lot of money because Google is effectively focusing less on informational search and more on commercial search. I mean searches with purchasing intent, such as “best laptop recommendation.” We cannot know the full search-volume statistics from the outside, but in my subjective experience, the quality of actual search results is often much worse than expected.
In that sense, Google’s revenue now feels less like it comes from serving small developers or end users, and more like it comes from selling infrastructure to large companies and major developers. The huge increase in Cloud revenue seems especially important. Google appears to be strong in enterprise AI solutions, and as an AI development platform it seems extremely powerful. My impression is that the center of gravity in AI development platforms is shifting somewhat from Microsoft toward Google.
However, revenue growth does not necessarily mean product quality. Since AI is increasingly absorbing informational search, users may end up using Google mainly for commercial-intent searches. From another angle, that gives Google an incentive to tune its algorithms and layout around purchase-intent queries.
Separately from that, there is a sharp contrast between Google as a development platform for companies and Google as a service experienced by end users. From the end-user perspective, the experience feels worse every day. Search feels poorly maintained. Ads also feel poorly controlled; for example, adult ads may appear to teenagers. Outside the Gemini API, the places where users can actually use Gemini feel fragmented, and the web version of Gemini is difficult to use seriously because of strong token limits.
Google seems to be trying very hard to serve developers who build on top of Google. But separately from that, ordinary users of Google services increasingly feel neglected.
> Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
This isnt a Google issue. Users are asking for it - ChatGPT and Perplexity did it first and it'd be crazy for Google not to do that.
You could argue Google being late to LLMs were a good thing, and once they were forced to play the game, they played
This makes sense from a financial perspective. But Google’s main service became centralized and convenient because it acted as the traffic gateway of the web. The moral question is a different matter.
Suppose an electricity utility builds the power grid, and many businesses build their operations around that grid. Then later, the utility uses its privileged position in the grid to directly replace the businesses that depended on it. Would that be morally acceptable? It may be correct from a business perspective, but that does not automatically make it good for the whole ecosystem.
In a capitalist society, companies are pressured to create new cash cows, enter adjacent markets, and even perform self-disruptive innovation in the interest of shareholders. This may be one such case. But whether that benefits the overall ecosystem is a separate question.
Users want free content.
Users want services without ads.
Users want fast summaries.
Users want answers without reading the original source.
Those desires are natural. But if producers cannot remain sustainable under those desires, then the long-term quality of information may collapse.
Google can preserve revenue through AI Overviews, while creators may lose revenue. The problem is that AI Overviews occupy a large container near the top of the results page and hide or push down the sources users would otherwise visit. In other words, the UX design emphasizes Google’s AI answer while making external sites less visible.
It is true that content creators now have to compete with Google’s AI Overview. But this competition is asymmetric.
From the company’s perspective, and from the shareholder perspective, Google’s decision may be correct. They are far smarter than I am. But it is still unclear whether Google will remain unharmed if the ecosystem that feeds it is gradually destroyed.
I know for most people that the big surprise here is sustained search ad revenue in the face of AI. But I’m super curious on margins because I thought for sure offering so much free AI inference would be so insanely expensive it harmed margins.
No one is losing money on inference these days. Google's vertical integration means that they have some of the lowest inference costs in the industry in any event.
I think they make most of their money off searches with intent (“vehicle detailing near me”) and things for which they still send you somewhere. The kind of searches that an LLM can just answer probably largely just sent you to Wikipedia or somewhere nobody was paying much for anyway.
It’s possible AI will do a better job of capturing ad dollars by better serving intentional searchers.
There's a part of the tech industry that uses what I would call dark influencer techniques. Search is dead. Lidar is too expensive for AVs. LLMs are as scary as thermonuclear bombs. China China China. Without ALPRs you'll get carjacked picking up Tommy from soccer.
Some of it is for stock pumping, some for regulatory capture, some is flooding the zone with shit.
This kind of "marketing" is part of the reason why tech is held in low esteem now. It destroys the sense of optimism and replaces it with fake tech bro worship.
I hate the china fear mongering. It's like the 50s red scare but 10x dumber since by all realistic accounts china is just. another government. a scary one and powerful one, yes, but so is the us. They aren't a rogue state like the DPRK or Iran, aren't funding terrorism by any realistic, and realise that starting any wars is a very bad idea
Still no sign of Waymo in Other Bets revenue, which fell from $450M to $411M.
But they're presumably investing more in it, since Other Bets income fell from $-1,226M to $-2,100M, meaning expenditure went up $800M YoY. (Obviously not all of this was Waymo though.)
I've been wondering when we'll see it unambiguously showing up in there. I suspect this time next year it'll be visible for sure, maybe Q4 of this year?
Search is doomed for people creating content that depends on organic search traffic because Google's AI is providing the content directly to people doing the search.
My decade old tech blog with 500+ posts now gets 10x less traffic than it did a few years ago and I'm actually on the fence on pulling the plug on my 10 year old business because traffic is so low it now costs me more to host video courses that I sell than I make per month from them. In turn this comes with other implications, such as maybe stopping my YouTube channel and no longer contributing to open source because paying bills has priority over hobbies. I enjoy spending time on these things and morally was always ok with giving away almost everything I do and learned for free, but income requirements are very quick to slap you into reality.
When I went through YC in 2007 a founder whose name you know drunkenly told me at a party that Google Docs and Macbooks would have Microsoft out of business by 2012. Someone here told me in 2018 I was nuts to buy a gas-powered car because in less time than you would drive a car for, everyone will have switched to electric and there will be no gas stations left.
The impending deaths of most things are greatly exaggerated.
Both can be true? You can be doing really well and still have long term risk. Dethroning incumbents takes longer than people think and it’s possible that search growth goes 20%, 10%, -10%, -50%
After all these years, I still think that this was a wasted opportunity on Google's side. As is well-known, Google (Googol) is a constant: 10^100. Instead of Alphabet, they should have named the umbrella company AlephBet [1] with a tag line: "we stopped thinking in constants".
Google grew revenue 22% YoY and operating income 30%, with growing margins. Search revenue still growing 19%, an acceleration vs YoY growth this time last year.
Cloud grew revenue 63%. Cloud income up from $2.2b Q1’25 to $6.6b Q1’26.
https://www.reddit.com/r/stocks/comments/1sza7xi/alphabet_be...
Who is the competition or why is there no competition? Surely disrupting this industry is possible?
Can anyone explain how search revenue is still _growing_ in the age of LLMs?
Have you looked at the results for any commercial query, something like [sofa beds] or [hard drives]? It is basically 100% ads. Anything where the user is intending to spend money, they show only ads, and have all the top producers in the world bid against each other for who gets featured, and Google captures essentially all surplus value in the transaction.
My wife is an investor, and one of her portfolio areas is pharmaceuticals. A couple of portfolio companies have reported that it's becoming basically impossible to make any money off of a new product, because you need to advertise it to reach the customer, and Google will skim all the excess producer surplus off as you compete with other startups serving the same market.
It's basically the perfect business model. They own the path to the consumer, which means they own the economy.
I'd also recently hired someone out of Google Search, and they said that the only queries that "legacy" (non-AI-mode) search cares about are commercial-seeking queries, and the only metric they optimize for is ad conversions on those. It literally is thousands of people whose only job is to get you to click more ads.
The open decentralized internet of the 2000s was one of the greatest common goods in human history. It makes me incredibly sad to see it destroyed so quickly. The niche blogs and forums that still exist are still incredibly useful when I stumble on one researching a niche topic, but I know their days are numbered with search traffic rapidly going to zero.
Maybe in the future something comparable will be invented and protected. No harm in dreaming a little I guess.
Doesn't even have to be a query where you intend to spend money, I can't tell you the amount of times I look something up wondering if it exists or to learn more about it and it tries to sell me something
This is partially why search is doomed. Sure LLMs are overtaking search, because search has been enshitified to the point you need an LLM to even get thr answer you’re looking for.
I keep thinking how often LLMs are used to “solve” problems we created.
“Meeting starts at 3” gets fed into an LLM to turn it into a 3 paragraph email, only to be summarized by a different LLM on the other email client end as “Meeting starts at 3”. What a waste.
Is there some writing on the wall? In the future if LLMs are more efficient and eventually commoditized, needing less infraestructure to be run (think on-device as chip efficiency increases). Apple can eventually just make their own, and provided they don’t benefit from the Google partnership anymore, who will need a search engine aside from Android and PCs?
> In the future if LLMs are more efficient and eventually commoditized, needing less infraestructure to be run (think on-device as chip efficiency increases).
You speak as if this is given. Sure, LLMs are gonna get effective but frontier ones are always going to be hosted.
Also, on-device LLMs are gonna have a 'cutoff' for training data. You cant ask a gpt-oss4 about "Who won Arsenal x Athetico Madrid game". It has to go to the internet, and do the 'search'. You certainly cant ask the local model "What was Google's Q1 2026 earnings".
The self-hosted / on-device LLMs are going to do a lot, but not all and the moment 'search' is involved, people will reach for Google.
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Lots of commercial queries need to be 'fresh' ("Build me an itinerary for Paris"). While a self-hosted LLM can do it, you might not want to trust it, because its info might be stale.
I encourage you to go beyond group think (HN is guilty of that) and really evaluate your position is actually valid or not.
Potentially but not in the way most people think.
Non-commercial queries are basically a loss-leader for Google. They don't care about them, except that they keep people in the habit of Googling things whenever they need information, which is critical for the whole business model to work. That's why ChatGPT was such a threat: for a while it looked like people might get out of the habit of Googling things and instead just ask ChatGPT, which would've been disastrous. But they seem to have headed it off with Gemini and AI mode. I was just researching something new today, and while I felt like Claude gave slightly better responses, AI mode gave more convenient responses, with direct links and browser integration.
This is why commoditized LLMs aren't a threat. If it's commoditized, people just go to the one which already fits their habits, which is AI mode. And they don't charge anything anyway, so competing on price doesn't work.
New computing devices that don't default to Google Search are a threat. But that's why Google funded Chrome, and Android, and paid Apple billions to be the default search provider in Safari and iOS, and paid Mozilla billions to be the default search provider in Firefox. As long as the results for non-commercial queries aren't actively bad, it'll likely be hard to convince people to switch away from them, particularly given existing habits.
If I had to list the biggest threats to Google's stock price, I'd put them as:
1. A global macro downturn. Google's stock has been pretty macro-sensitive since COVID, because as the tollkeeper to the economy, their revenues directly depend on how many economic transactions there are. If say the Straight of Hormuz crisis results in stagflation, even if it's stagflation in Asia and Australia and Europe rather than the U.S., Google's going to feel it. You even saw that with the ~20% swoon in the early days of the crisis.
2. Dead Internet Theory. If people just give up on the Internet because it's boring or not good for their kids or filled with bots or just not useful, and return to their local communities, this is also the end of Google. There've been some moves in this direction (eg. we're raising our kids to socialize in person with neighbors instead of going online, and many teenagers today think the Internet is decidedly Not Fun), but it also needs to be much more widespread, and get around the fact that many niche products are only available online.
3. Internal decay. I'm an ex-Googler, still have a couple of (increasingly disenchanted) friends there, though many of my friends have retired or left in the last few years. It is a shitshow inside, with a mess of perverse incentives, sometimes incompetent executives, and employees who don't care and are just phoning it in while the stock price goes up. I'd still get questions on code I wrote in 2010, from teams in Bangalore who were just taking over the legacy search stack, who would ask me things because I was literally the only one left at the company from when the code was written and I'd be like "How the hell should I know? I left this project 15 years ago, left the company, haven't worked on Search since 2014, had several other positions, came back, several billion lines of code has been written on top of it since then, still don't work on Search nor do I actually write code anymore, no I can't answer whether this code is important or whether anything will break if you get rid of it." Particularly now that ~75% of the code at Google is written by AI, there's a decent chance that somebody or some AI will introduce a change that breaks the golden goose, it won't be caught until several million more lines of AI-generated code have been checked in on top of it, and that'll be the end of the fabulous machine known as Google. Reportedly this is what happened to Twitter DMs, they used AI to check in some code that broke the feature, nobody knew how to get it working again, and so they just unlaunched it.
I hope number 3 gets them. A modern icarus
I'd be both saddened and wryly amused if it was #3. I can just imagine the day: first the 500 server errors whenever you went to do a Google Search, then the frantic denials that there is a problem, the poor SREs that would be working overtime without any idea how to bring the system back, the pushes toward other projects, the Wall Street damage control, followed by the stock market crash as people realized it wasn't coming back. Imagine how much your habits would have to change if you couldn't access Google: a lot of people get to all their favorite websites through navigational searches.
It'd have to be a major black swan, though, because there are many layers of canaries and metrics checks and rollbacks and backups in place. I think the issue now is that an increasing number of Googlers don't realize why these are important, but Search was built for robustness.
sounds like a new chapter in Das Kapital.
IMNSHO there is actually a profound economic insight in there, which is that you will face a drag on economic activity whenever a private party owns a portion of the path to the consumer. Think of the path to the consumer in say the 1880s: you went to the local general store, you met the vendor in person, you handed over cash, you got the goods. Not many areas where a third-party could interpose themselves to collect tolls; maybe the general store owner could, and many of them ended up quite locally wealthy, but their profits were capped by your ability to go to the next town over.
Now think about today. You search on Google and they run an auction to charge the vendor for getting their products discovered. You go to their website, but their website needs to be protected by CloudFlare from all the people who would take it offline. You buy the product with your Visa, which takes their ~1.6% merchant fee. They sell it with Stripe, which takes their 2.7% fee. You pay shipping and handling for UPS or FedEx to deliver it. Local, state, and federal governments all take tax out of this. Increasingly we're getting national-level shakedowns like Iran charging tolls for the Straight of Hormuz now.
Note that it was similar in olden times whenever one party could control the flow of goods between producer and customer. Sea merchants made huge profits in the 1500-1600s. Standard Oil got to be huge with its control of the distribution infrastructure for oil.
European governments have actually woken up to this with passage of laws like the DMA, but the American government has taken the other tack and decided that if life is a massive shakedown it's going to get in on the extortion business.
This is absolute nonsense.
You are mangling a well defined term of producer surplus that is widely accepted in economics with your own.
Can you explain more?
I'll explain, because it is true that I'm using "producer surplus" in a non-standard way, but I'm doing it to illustrate a specific point about how Google's business model works and why it is so profitable.
Normally, in an Econ 101 supply/demand model, you have an upward-sloping supply curve indicating how many units of some commodity a producer is willing to sell at a given hypothetical price, and you have a downward-sloping demand curve indicating how many units of some commodity a consumer is willing to buy at a given hypothetical price, and the point at which they meet is called the "market clearing price" where supply and demand are in balance. The area above the supply curve and below the market-clearing price is called the "producer surplus" [1], the amount of extra money the producer gets from the gains of trade. Very roughly, you can think of it as operating profit, though it's not quite the same thing because operating profit is a real tangible dollar amount while the supply curve is largely a hypothetical.
The way Google works is that it comes in for each individual transaction and effectively tells the advertiser "So you have a product or service that you'd like to sell? How much is it worth to you?" It runs a second-price VCG auction [2][3] to determine which of the available ads are shown to the user. Why second-price? Because an ordinary first-price auction incentivizes users to bid less than their true willingness to pay, because they know that if they win the bid, they will have overpaid. Same issue as buyer's remorse in real estate transactions: you know that if you won the bid, it was because nobody else thought the house was worth as much as you did. With a VCG auction you're only paying the marginal harm to the next bidder of winning the auction, so you have an incentive to bid your true valuation. And this is why I used the term "producer surplus" in the original post: it's to capture how Google effectively elicits from each advertiser the maximum amount that the transaction is worth to them, which if they're bidding rationally is the difference between their reservation price and the price they'll receive from the transaction, i.e. the producer surplus.
This also demonstrates where I've been playing fast and loose with the terminology. The price a VCG auction participant pays is not actually their bid, it's the marginal harm caused to other participants (basically the sum of all bids except the advertiser, minus the sum of bids of the other winners). But in a fairly competitive market, one with multiple producers who all face roughly the same cost structure, you'd expect that this quantity converges to the advertiser's actual bid, leading to a condition where Google has actually captured the entire producer surplus and maximized its revenue.
[1] https://www.intelligenteconomist.com/producer-surplus/
[2] https://en.wikipedia.org/wiki/Vickrey%E2%80%93Clarke%E2%80%9...
[3] Technically, it's a modified VCG auction, because the actual ranking score is a machine-learned function that also includes factors like "What's the likelihood the user is going to click on this ad?", "Is this ad spam or malware or illegal?", and "Is there brand damage to us from highlighting this ad?" But from an economics perspective, the only important part is that it's a second-price auction.
Gemini in search (AI Overview) is likely the most used LLM in the world, and ads can still surface around it.
(googler, opinions are my own. I know nothing about this outside of external info)
Is it the most used LLM because people want to use it, or because it literally can't be turned off aside from an obscure search parameter or using a slur in your search
Is there a difference?
I have access to ChatCPT, Gemini, Claude and you know what I still do 99% of the time?
I open Google Search. If I want an LLM, I click “AI Mode.”
I only bother to open Gemini or ChatGPT or Claude if it’s a “big research thing” which is almost never.
Why would llms replace search? It was a crazy take in 2023 and is still one today. Suppose there are no search engines and you want to find some headphones. How exactly are you doing this with llms?
Actually no, LLMs (preferably tool-using LLMs that can themselves do web searches and price lookups) are a great way to shop, especially if you're looking in a category and don't know exactly what item you want.
You just say "I want to find some headphones" and it makes you some recommendations. Or it helps you nail down what you're looking for first and then gives you options at various price points. I've found this useful when shopping for cars, computers, tourist activities, and much more.
In my example there are no search engines. And if there were why would they allow tool calls?
Your premise is absurd.
Search engines do exist, and search engines do allow tool calls. Try find an AI chat provider that doesn't connect web search to the agent.
Bing and google do not give you free and unlimited calls. And of course there are many clients… which harness lets you call bing or google on all devices locally?
As far as the premise goes, people on this very site were saying it. The very parent is surprised search is growing.
Personally, I use an LLM to use the search engine. I don't know how this impacts search revenue. It might increase it!
For most people Google Search is the LLM they're using.
Another way to think about this is that LLM based search actually grows the entire pie for search and so multiple players can all be growing at the same time.
The real losers are publishers, blogs, forums etc. Instead of traffic going to them that traffic is being turned into more search queries and more LLM responses.
Same way all big companies do, start changing what "search" means and including things under "search" that you might not think belongs there.
It literally doesn't matter why search revenue is growing. What is observably true is that it is that it is growing, as has it has been, throughout the LLM era.
Absent additional information, no one else can identify the false assumption underlies a strong belief that this should not be case. But something is flying in the face of the facts, and has been for a while. So, yeah, might want to take a look at those priors.
4 top paid search results (take up the entire screen)
AI overview (organic for now?)
3 organic results (below the fold)
2 paid search results
Image results
1 organic result
If I don't run paid ads I don't get leads I rank organically for a lot of the keyphrases I'm bidding on (top 3 results)...organic 0-2 calls a week, paid ads 4-6 calls a week (niche business).
I have been wondering the same thing myself. I manage google ads for a living and I don't understand why I still have a job.
Personally I use AI chatbots to help me make every purchase decision I have to think about.
How do you find the place to buy the thing you're looking for?
I just tried asking ChatGPT where to buy a backpack I'm looking for and it just... did a search. It would have been considerably faster to just do the search myself instead of wade through the slop about how "This backpack is hard to find in stock, you'll need to buy it directly from the brand yada yada yada".
Not everyone is using LLMs and people who do are probably using Google for higher value and targeted search.
Do chatbots click ads?
Ads dont need click to be effective.
I don't think I've ever clicked on an ad on purpose
Yet, ads are super effective. Think of the many Apple ads you watch, and how enticing those devices look.
Brand awareness is all that matters. Apple isnt counting on me clicking on the ad to buy the macbook
Many LLM agents do automated web searches.
Monopoly pricing power
Ad targeting llms continue to improve
I don't follow this stuff too closely, but Cloud growing by 63% seems astounding. It'd be interesting to know how much of that is converting AWS and Azure workloads to GCP.
Or deals with their own/third party LLMs?
LLM/AI growth is the major driver of usage growth on all the clouds.
22% YoY revenue increase.
Doing something right.
Maybe mass layoffs like Oracle/Meta/Amazon are doing isn't actually a good way to grow a company after all!
I have internal knowledge, I am closely affiliated with Google.
Infrastructure and scalability has been and is key, as well as technical expertise still absolutely super top notch.
Let’s put it this way: Google is the only company that knows how to find, store and utilize information beyond a specific narrowing. And I mean it really in the sense of curating, compression, long time storage, load balancing as well as compliance and world wide redundancy with a focus on speed and efficiency.
Under the hood of AI is pure engineering genius. Google might be trashed as the Search Engine giant that only displays ads now, but reconsider.
Why does all AI provider except for Google have massive problems with load time, reach, etc? Apple chose Google mainly because of the infrastructure. They eat everyone for lunch here. And they earned it.
Engineering at Google etc. are still the finest you can read about software engineering at the highest level. It is highly impressive how Google managed to not fall behind OpenAI. Who else was able to join the race? Microsoft? No. Apple? Oh well… Meta etc. won’t get there ever.
I think that Gemini is 3rd behind OpenAI and Claude but mainly because Google being Google, they kind of have no versioning for their AI and therefore the results are pretty much random in quality, less predictable than the others.
But the creativity and tooling like Nano Banana - fantastic.
There you have it. People don’t get that it is the infrastructure the moment they complain about Claude outtakes here.
Gemini is not reliable whatsoever: https://openrouter.ai/google/gemini-3.1-pro-preview/uptime (the orange chart is either AI studio or Vertex, I suspect AI studio, but it's not good either way).
The reason you don't hear people complaining (esp on HN) is because noone is using Gemini with coding agents. Claude Code, Codex (and IMO OpenCode et al with open weights models) are miles ahead of Gemini CLI/Jules/Antigravity/whatever other coding products Google have.
I tried gemini-cli.
While the model was "ok" everything else was trash.
Constant 429s or 502s for "reasons".
10 different ways to try and pay for the stupid thing and none of them clear.
My favourite was as a paying customer I could not get it to use the latest model. Sometimes it would but most times it would dump me to 2.5.
All of my experience is exactly the opposite of the gp comment is saying.
The gemini-cli repo is gong show too https://github.com/google-gemini/gemini-cli
I noticed early on that Gemini responded multiple times faster than claude and chatgpt do, which is why I use it as my main daily LLM (claude code for coding, gemini for all general queries).
Don't you worry, Leadership will get us off this reliable Tech Island and onto the shit-infested Tech Continent that the rest of the world lives on.
This is such an interesting take. Thank you.
Seconding that, not sure if it's the full take I'd stand behind but the perspective is definitely food for thought and way more thought out than my own.
Google was one of the earlier companies to do mass layoffs, back in 2023: https://www.cnbc.com/2023/01/20/google-to-lay-off-12000-peop...
AFAIK this is literally the only time google has laid more than a few thousand off at once
They did it again in 2024 and then switched to continuous drip of small "layoffs" and encouraging attrition. They have tried various layoff flavors: random, strategic, political, voluntary, and now in their continuous microlayoff era good luck distilling a consistent simple explanation for the day to day decisions of many thousands of managers.
Google has cost-cut their old hiring and performance management processes, and eliminated many perks and benefits that were peculiar to Google. As the unique characteristics of Google as an institution are pared away, it makes sense that they would also adopt the standard approach to layoffs and that is what we have seen since 2023.
Link? I don’t recall any mass layoffs in 2024, and by mass I mean multi thousand
Only if you count a single day. If you count yearly Google has not stopped layoffs of "more than a few thousand" since 2023. And I bet some months get above 1000. The big layoff in 2023 was not actually the first time by the way, that was much earlier (there was a wave of office consolidation in the 2010s). Also the 2023 layoff was at least 3 distinct waves.
And constant layoffs very much have the result on morale you'd expect today.
Link?
Layoffs might not be the best way to keep talent. Imo, Nintendo did it best back in 2014 [1].
[1] https://www.nintendolife.com/news/2014/01/iwata_and_miyamoto...
Google has been continuously laying people off for a few years now
Google is also doing layoffs. They just aren't making the news because they are PA by PA and they are preceded by buyouts. But we've had layoffs every year since 2023.
Uhh have you seen the revenue growth of them? Oracle 22%, Amazon is 17% (if im reading it right) and Meta was 33%
I don't think any of them are learning the lesson you think they are
I guess making like 75% of their search results ads that look like results works.
In the long run, judging from recent incidents such as YouTube monetization suspensions, I do not think Google is good for the consumer web experience or for content creators. I also think SEO search has almost completely broken down.
In particular, the flow that used to support content creators through Google Search has been damaged. Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
That said, I think Search is still making a lot of money because Google is effectively focusing less on informational search and more on commercial search. I mean searches with purchasing intent, such as “best laptop recommendation.” We cannot know the full search-volume statistics from the outside, but in my subjective experience, the quality of actual search results is often much worse than expected.
In that sense, Google’s revenue now feels less like it comes from serving small developers or end users, and more like it comes from selling infrastructure to large companies and major developers. The huge increase in Cloud revenue seems especially important. Google appears to be strong in enterprise AI solutions, and as an AI development platform it seems extremely powerful. My impression is that the center of gravity in AI development platforms is shifting somewhat from Microsoft toward Google.
However, revenue growth does not necessarily mean product quality. Since AI is increasingly absorbing informational search, users may end up using Google mainly for commercial-intent searches. From another angle, that gives Google an incentive to tune its algorithms and layout around purchase-intent queries.
Separately from that, there is a sharp contrast between Google as a development platform for companies and Google as a service experienced by end users. From the end-user perspective, the experience feels worse every day. Search feels poorly maintained. Ads also feel poorly controlled; for example, adult ads may appear to teenagers. Outside the Gemini API, the places where users can actually use Gemini feel fragmented, and the web version of Gemini is difficult to use seriously because of strong token limits.
Google seems to be trying very hard to serve developers who build on top of Google. But separately from that, ordinary users of Google services increasingly feel neglected.
> Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
This isnt a Google issue. Users are asking for it - ChatGPT and Perplexity did it first and it'd be crazy for Google not to do that.
You could argue Google being late to LLMs were a good thing, and once they were forced to play the game, they played
This makes sense from a financial perspective. But Google’s main service became centralized and convenient because it acted as the traffic gateway of the web. The moral question is a different matter.
Suppose an electricity utility builds the power grid, and many businesses build their operations around that grid. Then later, the utility uses its privileged position in the grid to directly replace the businesses that depended on it. Would that be morally acceptable? It may be correct from a business perspective, but that does not automatically make it good for the whole ecosystem.
In a capitalist society, companies are pressured to create new cash cows, enter adjacent markets, and even perform self-disruptive innovation in the interest of shareholders. This may be one such case. But whether that benefits the overall ecosystem is a separate question.
Users want free content. Users want services without ads. Users want fast summaries. Users want answers without reading the original source.
Those desires are natural. But if producers cannot remain sustainable under those desires, then the long-term quality of information may collapse.
Google can preserve revenue through AI Overviews, while creators may lose revenue. The problem is that AI Overviews occupy a large container near the top of the results page and hide or push down the sources users would otherwise visit. In other words, the UX design emphasizes Google’s AI answer while making external sites less visible.
It is true that content creators now have to compete with Google’s AI Overview. But this competition is asymmetric.
From the company’s perspective, and from the shareholder perspective, Google’s decision may be correct. They are far smarter than I am. But it is still unclear whether Google will remain unharmed if the ecosystem that feeds it is gradually destroyed.
I know for most people that the big surprise here is sustained search ad revenue in the face of AI. But I’m super curious on margins because I thought for sure offering so much free AI inference would be so insanely expensive it harmed margins.
No one is losing money on inference these days. Google's vertical integration means that they have some of the lowest inference costs in the industry in any event.
Microsoft recently announced changes to copilot because, apparently, it was losing money on inference.
Sundar's remarks: https://blog.google/company-news/inside-google/message-ceo/a...
Everyone thought Google Search would die from AI, but people are searching more than ever.
Not sure how they will justify zero click to advertisers though, except youtube.
https://www.google.com/search?q=did+google+seach+increase&oq...
I think they make most of their money off searches with intent (“vehicle detailing near me”) and things for which they still send you somewhere. The kind of searches that an LLM can just answer probably largely just sent you to Wikipedia or somewhere nobody was paying much for anyway.
It’s possible AI will do a better job of capturing ad dollars by better serving intentional searchers.
There's a part of the tech industry that uses what I would call dark influencer techniques. Search is dead. Lidar is too expensive for AVs. LLMs are as scary as thermonuclear bombs. China China China. Without ALPRs you'll get carjacked picking up Tommy from soccer.
Some of it is for stock pumping, some for regulatory capture, some is flooding the zone with shit.
This kind of "marketing" is part of the reason why tech is held in low esteem now. It destroys the sense of optimism and replaces it with fake tech bro worship.
I hate the china fear mongering. It's like the 50s red scare but 10x dumber since by all realistic accounts china is just. another government. a scary one and powerful one, yes, but so is the us. They aren't a rogue state like the DPRK or Iran, aren't funding terrorism by any realistic, and realise that starting any wars is a very bad idea
Still no sign of Waymo in Other Bets revenue, which fell from $450M to $411M.
But they're presumably investing more in it, since Other Bets income fell from $-1,226M to $-2,100M, meaning expenditure went up $800M YoY. (Obviously not all of this was Waymo though.)
I've been wondering when we'll see it unambiguously showing up in there. I suspect this time next year it'll be visible for sure, maybe Q4 of this year?
12 months ago everyone agreed that Search was doomed, ChatGPT would kill Google, and Bard/Gemini were a joke.
Search is doomed for people creating content that depends on organic search traffic because Google's AI is providing the content directly to people doing the search.
My decade old tech blog with 500+ posts now gets 10x less traffic than it did a few years ago and I'm actually on the fence on pulling the plug on my 10 year old business because traffic is so low it now costs me more to host video courses that I sell than I make per month from them. In turn this comes with other implications, such as maybe stopping my YouTube channel and no longer contributing to open source because paying bills has priority over hobbies. I enjoy spending time on these things and morally was always ok with giving away almost everything I do and learned for free, but income requirements are very quick to slap you into reality.
You may be right, but that was not the point. There were many voices who claimed that AI would make Google obsolete.
If Google Search hadn't adopted AI it would have quickly been rendered obsolete, so yeah.
When I went through YC in 2007 a founder whose name you know drunkenly told me at a party that Google Docs and Macbooks would have Microsoft out of business by 2012. Someone here told me in 2018 I was nuts to buy a gas-powered car because in less time than you would drive a car for, everyone will have switched to electric and there will be no gas stations left.
The impending deaths of most things are greatly exaggerated.
People overestimate the rate of change in the short run and underestimate the impact of change in the long run.
- https://www.rip-grep.com/
- https://www.rip-grep.com/microsoft
Huh, funny. I always associated ripgrep with the find/grep replacement written in Rust:
https://github.com/burntsushi/ripgrep
Wonder if it was an intentional pun.
Next: “SWE is largely solved, expect mass unemployment in the next few years”?
That's already half of the threads I see on reddit lately.
Except we're actually seeing a non-trivial reduction in SWE jobs, particularly entry-level roles.
May be short term and turn around at some point, but the current trends definitely feel lower vs. higher.
Are we? Compare to when? How about compared to the 30 year variation, not just the last 6.
In “big tech” or internet services, or also the non-tech companies that employ most engineers?
I wonder how much of that is driven by organic market forces or through anti-competitive practices.
For example, Chinese electric vehicles are selling like hotcakes in Europe but you'd be hard-pressed to find any in the US.
what was ur startup
Both can be true? You can be doing really well and still have long term risk. Dethroning incumbents takes longer than people think and it’s possible that search growth goes 20%, 10%, -10%, -50%
By everyone, maybe you mean "only people dumb enough to post on hacker news"
Their stock is up 7% after hours.
You'd be crazy not to be long Google.
Alphabet was Warren Buffet's last "hold" pick afterall.
crazy work from whoever at Alphabet is in charge of selecting domain names for their sites.
After all these years, I still think that this was a wasted opportunity on Google's side. As is well-known, Google (Googol) is a constant: 10^100. Instead of Alphabet, they should have named the umbrella company AlephBet [1] with a tag line: "we stopped thinking in constants".
[1] https://en.wikipedia.org/wiki/Aleph_number
That's been Alphabet's site since the restructuring happened back in 2015. The site has barely changed in a decade.
from doc.new to blog.google, they are on top of that
Also they have got some cool ipv4 range like 8.8.8.8 too
(Edit I had confused it earlier with 1.1.1.1 which is from cloudflare)
Now that data is a commodity directly tied into the AI arms race, they killed https://developers.google.com/custom-search/v1/overview which is really sad
how much of the cloud revenue is from Anthropic revenue sharing?