YouTube, a subsidiary of Alphabet Inc., continues to yield increasing profits for the company. For the first time in history, the revenue from advertisements and subscriptions over the past four quarters exceeded $50 billion.
YouTube has some particularly lucrative areas of activity. Music Premium, YouTube TV and NFL Sunday Ticket lead in the growth of subscription revenues.
“Showing YouTube’s results for Q3 2004, Alphabet firstly did not surprise investors, which is very positive news,” says Tymoteusz Turski, a stock market analyst at XTB, in a conversation with MarketNews24. “YouTube’s revenues are like a foundation for the entire company, and investors feared that the quarterly results might show that Alphabet, focusing heavily on the development of artificial intelligence, forgot about its main business segments, which generate the highest revenues. However, the latest quarterly report showed that Alphabet can build its future on still very solid foundations.”
Alphabet, which was founded in 2015 due to the successes of Google, is now facing a very challenging task given the high expectations of the market. Despite this, the company managed to report strong results for Q3 this year, surpassing the consensus market forecasts in the most important aspects, hence, maintaining strong revenue dynamics. Especially positively surprising was the cloud segment, which remains the most closely watched component of the company’s revenues.
At the sales level, the company achieved $88.27 billion, which represents a dynamic growth rate of 15.1%, 2.11% higher than forecasted. Adjusting for payouts to partners who redirect customers to Google, revenues still maintained strong value, reaching $74.6 billion (compared to forecasts assuming $72.9 billion).
The company also succeeded in maintaining an excellent cost discipline which resulted in a 33.7% year-on-year increase in operating profit to $28.52 billion (compared to $26.67 billion the previous year). This has led to maintenance of a record operating margin of 32%. The company has thus maintained an operating margin exceeding 30% for the third consecutive quarter.
Alphabet also did well in terms of adjusted earnings per share for 3Q24, which rose to $2.12, significantly surpassing the forecast of $1.84.
The company demonstrated solid sales dynamics in its key segments. The maintenance of high dynamics in segments based on advertising revenue (particularly YouTube and Google Search) enabled the company to ward off one of the biggest threats investors might have feared in the results for this quarter. AI is one of the leading drivers of the company, but with the increasing development of generative artificial intelligence, the potential to generate revenue in the company’s leading market segment, search engine, is shrinking. Despite this, Alphabet has shown that its AI-based solutions, which support search and use of the company’s technologies, do not only enhance customer experience but also translate into maintaining high, double-digit revenue dynamics. In the case of YouTube revenues, the total value for the last 4 quarters from both advertising and subscriptions has, for the first time in history, exceeded $50 billion. YouTube Music Premium, YouTube TV and NFL Sunday Ticket lead in subscription revenue growth.
“Google’s reported Search revenues being the largest element of the entire company grew by 12%, so it was the same dynamic as in the case of YouTube,” explains the XTB expert. “Google is part of a universe of tech stocks whose investor expectations are very high. It’s like a perfect crystal ball where we notice every emerging crack. Such cracks appeared when presenting earlier quarterly reports. However, this time the entire Alphabet showed very good results, especially in the cloud business, despite the high base effect from the earlier period.”
In the Google Cloud segment, the company significantly accelerated revenue growth to nearly 35% YoY. Such a value is notably above forecasts, and it indicates Alphabet’s strengthening position in a market where it competes heavily with Amazon and Microsoft.
Results for 3Q24 indicate not only the maintenance of strong dynamics in key segments but also the dynamic development of the company in the still rapidly developing AI market. This translates into Alphabet maintaining a leading position in the technology race.
“These results show that the company is still far from reaching its potential ceiling,” comments T.Turski from XTB.
Source: https://managerplus.pl/youtube-jako-motor-zyskow-alphabet-rekordowe-przychody-z-reklam-i-subskrypcji-w-2024-r-42762
