Despite a difficult advertising climate, Alphabet rode strong results from search and YouTube to record a net income increase of 41.5% to $19.69 billion, or diluted earnings of $1.55 per share, for its third quarter, beating Wall Street expectations. Revenue grew to $76.6 billion, an 11% year-over-year increase, the company said Tuesday.
Analysts surveyed by Zacks Investment Research were expecting the Google and YouTube parent company to report earnings of $1.45 per share and revenue of $63.13 billion.
The Wrap reports Ad revenue at YouTube grew 12% from $7.07 billion to $7.95 billion. Meanwhile, the Google search and “other” segment reported $44.03 billion in revenue, up 11% from the previous third quarter. The earnings report also noted that Alphabet took a $2.1 billion charge for severance costs for first nine months of 2023.
During the earnings call, CEO of Alphabet and Google Sundar Pichai emphasized the company’s continued focus on artificial intelligence, framing much of the company’s results around the developing technology. Google’s AI play has already been incorporated into search. Its personal assistant offering, Google’s Assistant with Bard, will be available for Android and iOS in the coming months, and the company is also developing AI solutions for developers, businesses and other organizations. From the second to third quarters, the number of active generative AI projects the company is working on grew by seven times, Pichai said.
This quarter also saw a 6% increase in operating expenses, bringing the total up to $22.1 million. The higher expenses reflected more spending on research and development as a result of increased spending on compensation, Alphabet executives said. Operating expenses also saw an increase in general and administrative expenses due to charges related to legal matters as well as sales and marketing expenses. The expenses for the latter were somewhat flat last year.
YouTube’s NFL Sunday Ticket and YouTube Shorts
Pichai also said the company was receiving positive feedback on its YouTube’s NFL Sunday Ticket. The third quarter of this fiscal year only reflects a few weeks of the added YouTube option. A full quarter of revenues for the sports initiative, as well as associated content acquisition costs, will appear in the company’s fourth quarter results.
YouTube’s non-advertising revenue, which is labelled as “other revenues,” grew by 21% to $8.3 billion, largely driven by subscriber growth from YouTube TV and YouTube Music. Altogether, premium options brought in $12.6 billion, up 7% from a year ago. Google Services’ operating income was $23.9 billion, up 27%.
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