YouTube reported its second best quarter ever in terms of sales on Tuesday, with the Alphabet-owned streaming platform posting $8.92 billion in Q3 revenue. Company executives said the strong quarter was driven in large part by artificial intelligence, which helped YouTube do a better job of recommending videos — a development that ultimately led to its viewers interacting with more ads.
Here are the key takeaways:
Revenue: Grew 12.1% year-over-year to $8.92 billion. It was the second straight quarter in which YouTube’s year-over-year increase declined, after revenues rose 20% year-over-year in Q1 and 13% last quarter.
Historical Comparison: YouTube’s best quarter in terms of sales came during Q4 2023, when the platform reported $9.2 billion in ad revenue.
The Last 12 Months: Alphabet noted YouTube’s total ads and subscription revenues surpassed $50 billion over the past four quarter for the first time.
YouTube Viewership: The company’s earnings release didn’t include an update on how many people watch YouTube. On the company’s earnings call, Alphabet CFO Anat Ashkenazi said YouTube had enjoyed “robust growth in watch time across the platform,” without offering further details. Chief Business Officer Philipp Schindler added YouTube’s Q3 ad growth was “driven by brand, closely followed by direct response.”
Subscriptions: Google subscription revenue — which includes YouTube TV, Premium, Music, and NFL Sunday Ticket — climbed 27.7% year-over-year to $10.66 billion. Pichai said “YouTube TV, NFL Sunday Ticket, and YouTube Music are driving subscription growth” on the company’s call, but didn’t offer further details on how each is performing.
Artificial Intelligence: Once again, AI was a fixture of Alphabet’s earnings report and call. As for Youtube, Schindler said the company is using AI to “greatly improve” YouTube recommendations.
“Driven by Gemini, our large language models have a deeper understanding of video content and viewer preferences. As a result, they can recommend more relevant, fresher and personalized content to the viewer,” Schindler said.
The tech giant’s overall sales increased 15% year-over-year to $88.3 billion. Google Services — which includes subscriptions, platforms, devices, and YouTube ads — accounted for the bulk of Alphabet’s sales, increasing 13% to $76.5 billion.
Alphabet’s shares closed 1.66% higher on Tuesday to $171.14 per share, and were up more than 5.5% in after-hours trading. Heading into its Q3 report, Alphabet’s stock is up 22.6% on the year.
YouTube remains the go-to destination for viewers looking for videos on a myriad of subjects, from kids content to football news to 2024 election coverage. A recent Pew survey found nearly one-third (32%) of Americans regularly get their news from YouTube, up from 23% in 2020.
But YouTube faces stiff competition for viewers from Netflix, which recently reported it added another 5 million subscribers and has 282.7 million customers overall.
Still, YouTube continues to lead the streaming pack in terms of viewership, with the platform accounting for 10.6% of all TV streaming in September, according to Nielsen’s Gauge report. Netflix accounted for 7.9% of TV streaming, and Prime Video, the third-ranked platform, accounted for 3.6%, according to Nielsen.
