YouTube’s TV Bet Is Paying Off in a Big Way – TheWrap

Pro Available to WrapPRO members A third of the platform’s $11.2 billion in ad revenue came from living room viewership, even as Wall Street frets about Google’s broader revenue pressuresAlphabet once again had a strong showing during its third quarter of 2026. But a 25% increase in revenue, growth in Search and increases at YouTube (especially as it relates to TV viewing — more on that later) weren’t enough to save the company from Wall Street’s increasing worries about AI. Shares retreated nearly 9% in the wake of the tech giant’s results. Overall, revenue for Alphabet came in just under $128 billion for the quarter, though the actual figure was a hair short of analyst expectations. The quarter was driven by Google Search and other divisions, which brought in $63 billion, a roughly 12% year-over-year increase. The query growth rate for Google Search was the highest it has been in the last five years.However, these strong results for Search were also impacted by the rise of agentic AI, as Google’s own AI mode essentially ate into the ad revenue the company saw from Search. Philipp Schindler, the senior vice president and chief business officer for Google, emphasized that the company is still in early days when it comes to agentic models, but that hiccup is certainly one to watch. The company also warned that its fourth quarter growth may not be as robust as shareholders have seen in the past.Net income dropped by over 25% compared to the third quarter of 2025, coming in at $26 billion. Earnings per share came in at $2.12, a decline from a year ago when earnings per share came in at $2.87. Earnings excluding one-time items came in at $2.67 a share, which factors a 55 cent-per-share, or $8.7 billion, hit from the write off of declines in its investment in Elon Musk’s SpaceX, which collapsed after its IPO. Here are some of the biggest takeaways from Alphabet’s third-quarter earnings report:YouTube once again had a strong quarter. Ad revenue from the division came in at $11.2 billion, a 9% increase compared to this time last year. Also, YouTube Music and Premium surpassed 150 million subscribers globally, a number that includes trials. During the quarter, living room viewership accounted for over a third of YouTube’s total ad revenue. The results show why Instagram is so keen to get into the living room (even if it faces significant challenges). Revenue from subscription, platforms and devices increased 11% to hit $14.3 billion. This was driven by strong growth in YouTube subscriptions, particularly when it came to YouTube Music and Premium plans, as well as strong demand for AI plans in Google One.Though there was growth in Search during the quarter, there was a deceleration in Search growth between the second and third quarters of this year due to Google AI.“It’s worth noting that the strong growth in AI mode queries had an impact because of the lower monetization we are seeing in AI mode,” Schindler said on Thursday’s call. “To be clear, we feel very good about our trajectory here. Our ad experiments have shown promising results, and we’re now scaling ads within both AI overviews and AI mode to more users and more queries, including international markets and multi-turn ads in the U.S.”That kicked off a flurry of questions from investors concerned that AI would cannibalize Google’s core search ad business, which is its primary revenue engine. Schindler addressed those concerns and emphasized that the company sees agentic experiences as “clearly additive” and that he’s excited about advertising opportunities in an agentic world.Queries in AI mode now average three times longer than traditional searches, and globally, one in five AI mode searches use voice, images or documents. Alphabet also shared that Google now averages over 50 billion visual searches per month.Sundar Pichai, the CEO of Google and Alphabet, also addressed the safety concerns people have around agentic experiences. “It is a very, very high factor in how they want to use these things. Over decades, the trust we have built by delivering these experiences in a safe way across many consumer products, with scale in billions of users as well as putting them end to end as we are building our models and agents, deploying them both with extensive testing, the kind of real-time monitoring we do as we deploy these at scale. I think all of that will end up being a huge differentiator. We already hear about it from our users,” Pichai said.In July, Alphabet increased its capital expenditures forecast for the year — jumping from around $190 billion to anywhere between $195 billion to $205 billion — to account for increased spending on AI. Alphabet’s $195 billion to $205 billion capex guidance range remained unchanged at the end of the third quarter. But it will be increasing next year.“We continue to expect our capex to increase significantly in 2027 and will provide further details on our Q4 call,” Anat Ashkenazi, the CFO of Alphabet, said.Alphabet shares fell 8.7% on Thursday evening in after-hours trading. Ashkenazi warned that Alphabet expects “slightly larger FX headwinds” to impact the company’s consolidated revenues in its fourth quarter compared to its third quarter. This is expected to impact search and YouTube ads, but Google Services is expected to continue lapping the search performance acceleration that began in the third quarter of 2025. Sales of its Tensor processing unit, the chipsets thta power AI data centers, are expected to scale in the fourth quarter. Alphabet also started utilizing third-party compute capacity at the end of this quarter and expects to ramp up its usage next quarter as demand for its AI services increases. “When we look at the year-over-year comparisons, this quarter we started lapping the acceleration we saw in Search growth in the back end of 2025,” Ashkenazi said.Please wait while we verify your access…Logged in as . Manage your account. Sign out?Comment * Sorry, we're having trouble loading commenting features. Please try again in a moment. To post a comment, please update your profile to include your name. Sign in to post a comment. source