YouTube Ad Revenue Inches Up 4.8% in Q2, Slowest Growth in More Than Two Years

YouTube still banks a huge bucket of ad bucks — hitting $7.34 billion in the second quarter — but the video giant’s growth has decelerated to its lowest pace in more than two years.

YouTube’s ad revenue grew just 4.8% in Q2, according to Alphabet, the parent of Google and YouTube. That was under Wall Street expectations: Analysts had forecast YouTube ad revenue increasing 7% year over year to $7.49 billion. The results come after YouTube’s Q1 ad sales had missed estimates by a wider margin.

YouTube saw a 84% revenue boom in the same period last year, to $7 billion, coming off the relatively anemic 5.8% bump in Q2 2020 amid the onset of the coronavirus pandemic. Alphabet first broke out YouTube ad revenue for the 2019 calendar year.

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Overall, Alphabet slightly missed earnings forecasts. The internet giant reported $69.69 billion in revenue, up 13%, and net income of $16.0 billion (down 14%), or $1.21/share. Wall Street consensus estimates had pegged revenue at $69.99 billion and earnings of $1.30/share, per Refinitiv data.

In addition to macroeconomic headwinds like rising inflation, analysts have speculated that YouTube ad dollars are softening because YouTube Shorts, the platform’s surging TikTok-like short-video feature, is siphoning viewing off the core, longer-form side of the house. Google last month boasted that YouTube Shorts has more than 1.5 billion monthly logged-in users, while it began testing ads for short-form videos only in the last few months.

On the earnings call, Alphabet CFO Ruth Porat said the main reason for YouTube’s ad-revenue slowdown was due to a “tough” year-over-year comparison with Q2 2021. But she also called out a “pullback in spend by some advertisers” on YouTube, which “reflects uncertainty about a number of factors.”

Note that the YouTube ad sales figures reported by Alphabet do not include subscription revenue from YouTube Premium and YouTube TV. Earlier this month, Google said YouTube TV has 5 million subscribers and users on free trials, putting it ahead of Disney’s Hulu as the biggest internet pay-TV service in the U.S.

Sundar Pichai, CEO of Alphabet and Google, said the company’s Q1 results were driven by its Search and Cloud segments. “The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes,” he said in prepared remarks. “As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long term.”

In Q2, Google Cloud turned in an impressive 36% increase in revenue, to $6.28 billion, although its operating loss widened to $858 million vs. an operating loss of $591 million in the year-ago period.