This is entirely due to complacent management. In the early 2000's Google's cleverness and engineering competence built a money cannon. The founders recognized the challenges that would be involved in running a huge corporation so they looked for some professional managers to do the job. Eventually the current management settled in, and they've consistently chosen the path of lowest risk and least resistance for their next quarterly financials. As long as there are no external shocks, they could always expect a profitable next quarter.

Now that a shock to the system is here, the management lacks the vision or long term planning to have any idea what to do about it.

I don't doubt that there's plenty of engineering talent left at Google. Under the right leadership they could be leveraging their unmatched assets to create the most capable AIs that exist. Under the current leadership, that's just not going to happen. Expect nothing more from Google under their current regime.