Google's AI search efforts are fueling the expansion of its advertising sector.
In the second quarter of 2025, Alphabet, Google's parent company, reported a significant surge in advertising revenue, marking a 10.4% year-over-year increase to $71.34 billion (€60.6 billion). This growth is largely attributed to the integration of AI technology into Google Search and YouTube ads.
Google Search revenues alone increased by 12%, boosted by AI features like AI Mode and AI Overviews, which have expanded globally to over 2 billion monthly users. These AI tools encourage increased search activity, especially among younger demographics, leading to more ad impressions and revenues within Google's owned properties.
YouTube Ads also experienced growth, with revenues increasing by 13% year-over-year to approximately $9.8 billion. The AI-driven features on YouTube are contributing to this growth.
However, the story isn't entirely positive for Google's Network advertising segment, which includes ads displayed on third-party publisher sites. This sector experienced a 1% year-over-year revenue decline to $7.4 billion, attributed to AI features increasingly answering queries directly, thus retaining users within Google's ecosystem rather than directing traffic to external websites.
This shift reduces monetization opportunities for third-party publishers and indicates a fundamental change in how search traffic flows. The rise of AI chatbots like ChatGPT contributes to this shift by changing user behavior toward more self-contained search experiences without clicks to other sites.
Google's CEO, Sundar Pichai, stated that AI is positively influencing all parts of Google's business. To support this growth, Alphabet is increasing investments for data center expansion from $75 to $85 billion this year. The expansion of data centers is a significant part of Alphabet's increased investments this year and is likely to support the continued growth of Alphabet's AI initiatives.
The revenue and profit growth at Alphabet surpassed market expectations, leading to an after-hours trading increase of more than 2% for Alphabet's stock. Companies that advertise with Google continue to benefit from this growth, with users being directed to their websites through these links.
Despite the challenges faced by third-party publishers, Google is holding its ground with its own AI summaries and claims that they are effective, encouraging more search queries on Google. The revenue growth at YouTube contributes to the overall revenue increase at Alphabet.
In the broader AI landscape, Google's competitors include OpenAI, the developer of ChatGPT. According to a study by Norstat, about half of AI users in Germany ask ChatGPT and similar services for advice instead of a search engine at least sometimes. This dynamic reflects both revenue acceleration for Google overall and intensifying competitive and structural pressures on the broader digital advertising ecosystem driven by AI technology.
The integration of AI technology into Google Search and YouTube ads is responsible for the 12% increase in Google Search revenues and the 13% growth in YouTube Ads revenues, demonstrating the positive influence of AI on Google's investing in the business sector, particularly in technology. On the other hand, the Network advertising segment experienced a 1% decline, suggesting that AI developments are altering the flow of search traffic and influencing user behavior, which has potential implications for third-party publishers in the online business.
