YouTube Q3 Ad Sales Jump 12.5% to Nearly $8 Billion, Alphabet Beats Estimates

Internet video giant YouTube larded its coffers with $7.95 billion in ad revenue for third quarter of 2023, representing a 12.5% year-over-year increase, as parent Alphabet overall topped Wall Street forecasts.

Analysts had projected YouTube advertising revenue to come in at $7.81 billion for the quarter, per FactSet. The stronger-than-expected results, which execs said came from both brand and direct-response advertising, come after YouTube fell short of expectations in the year-ago period, when ad revenue dropped 1.9%.

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Alphabet reported $76.69 billion in total revenue (up 11%) and net income of $19.69 billion ($1.55 per share) for the period ending Sept. 30, reflecting a healthy bump in Google’s core digital ads business. Wall Street consensus estimates were for $75.97 billion in revenue and earnings per share of $1.45, per to Refinitiv data.

Shares of Alphabet were down more than 6% in after-hours trading after Google Cloud — despite double-digit growth — fell short of investor expectations. The Google Cloud segment turned in Q3 revenue of $8.41 billion for Q3, up 22.5%, versus analyst forecasts of $8.64 billion, per FactSet.

In its earnings reports, Alphabet breaks out only YouTube ad sales. That excludes subscription revenue from YouTube TV, YouTube Premium and YouTube Music, as well as revenue from YouTube’s exclusive multibillion-dollar deal for NFL Sunday Ticket out-of-market games package.

“We have heard positive feedback from our partners at the NFL” about the reliability of the Sunday Ticket livestream and YouTube’s multiview feature that allows users to watch up to four simultaneous channels on the screen at once, Sundar Pichai, CEO of Alphabet and Google, said on the earnings call.

While execs didn’t provide financial or subscriber metrics for Sunday Ticket, Ruth Porat, president and chief investment officer of Alphabet and Google (and previously CFO), said on the call, “We expect to generate an attractive return over the life of the deal.” Google is reportedly paying the NFL as much as $2.5 billion per year over the course of the seven-year pact for the rights to Sunday Ticket.

In the last few years, YouTube has faced stronger competition from popular video entertainment app TikTok, which spurred the platform to introduce a copycat feature called YouTube Shorts. More than 2 billion monthly logged-in users now watch Shorts; on average, more than 70 billion YouTube Shorts are viewed daily, according to Pichai. Meanwhile, the company recently said it will shut down Google Podcasts in 2024, as it doubles down on making YouTube Music the preferred destination for podcast creators and listeners.

YouTube is currently led by CEO Neal Mohan (pictured above), who took over the post from Susan Wojcicki earlier this year.

“The fundamental strength of our business was apparent again in Q3,” Porat said in prepared remarks. The Q3 results were “driven by meaningful growth in Search and YouTube, and momentum in Cloud. We continue to focus on judicious capital allocation to deliver sustainable financial value.”

Alphabet’s total headcount during the third quarter dropped 2.4% year over year, to 182,381 employees, after the tech company’s layoffs earlier in 2023.

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