Google credits YouTube, programmatic ads as factors as it beats forecast with $18.7B in revenue

Despite its announcement of the much-anticipated YouTube Red subscription service just a day earlier, Google (NASDAQ: GOOG) CEO Sundar Pichai and Alphabet CFO Ruth Porat took advantage of one more chance to play their cards close to the vest regarding YouTube revenues and other segments. However, the online video service did play a role in pushing revenues above forecasts.

"The key highlight this quarter was the substantial growth of our mobile search revenue, complemented by ongoing strong contributions from YouTube and our programmatic business," Porat said on the third-quarter earnings call.

On the call discussing its forecast-beating third-quarter report, Porat said that YouTube revenue was growing at a "significant rate" across its TrueView and Preferred platforms. No exact numbers were given, which was normal under the old Google organization.

Pichai did note that differences in YouTube ad formats had a positive impact on paid clicks vs. cost per click. Overall paid clicks were up 23 percent year over year, with CPCs down 11 percent, the company reported.

"We continue to believe online video is the biggest online ad growth driver and YouTube is the premier vehicle to play that trend," the analysts at Jefferies said in a note to investors following the release of Google's earnings. "YouTube revenue continues to grow at a significant rate. Google onboards advertisers via the Google Preferred program, which reserves the top video content for the biggest advertisers. After the initial test run, advertisers are increasing their spend due to the effectiveness of the skippable TrueView ad format."

Programmatic advertising is a growth driver for Google as well: Pichai said that programmatic "is an area that is on fire for us" and that the number of advertisers using its programmatic ad platform has doubled over the past year.

Beginning in the fourth quarter, the new Alphabet will break out financials for Google and "other bets," including its moonshots, reporting revenues, profitability and capital expenditures for each segment.

Pichai also noted that sales of Chromecast devices have passed 20 million, and that more than a billion casts have been made. However, Porat said that Google saw lower overall hardware sales "as we reach end of life for certain Chromecast and Nexus devices." A new Chromecast featuring a more streamlined design rolled out last month.

For the third quarter, Alphabet, reporting Google's earnings for a final time, said that the company saw overall revenue of $18.68 billion, and an adjusted earnings per share of $7.35, up from $6.35 during the same period in 2014.

Those numbers were well above analyst forecasts of $18.54 billion in quarterly revenue and adjusted EPS of $7.21.

Google also announced a stock buyback of up to $5 billion in Class C stock (to be precise, $5,099,019,513.59, or the square root of 26, and yes, it's a nerdy wink to Alphabet).

Stock immediately rose more than 11 percent in after-hours trading on the Nasdaq.

For more:
- see the earnings release
- see this WSJ article (sub. req.)
- see this CNBC article

Related articles:
Google's subscription streaming service YouTube Red to cost $10/month, promises original content
YouTube Gaming adds mobile capture, sponsorship features to live-streaming service
Google, Yahoo, AOL go head-to-head with new platforms, strategies

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