YouTube Ad Revenue Drops 2.6% in Q1, Alphabet Takes $2 Billion Charge for Layoffs

YouTube Ad Revenue Drops 2.6% in Q1, Alphabet Takes $2 Billion Charge for Layoffs

YouTube’s advertising revenue dropped for the third quarter in a row, dragging down Google’s financial results as the video platform continues to navigate a soft ad market.

Ad sales at YouTube declined 2.6% year over year in the first quarter of 2023, to $6.69 billion. Analysts expected it to come in at $6.6 billion, per FactSet. Parent company Alphabet doesn’t break out YouTube’s subscription revenue (from YouTube TV or YouTube’s other premium services). YouTube revenue was down 7.8% in the fourth quarter of 2022 following a 1.9% dip the quarter before that.

Overall, Alphabet’s Q1 earnings beat Wall Street forecasts. It posted $69.8 billion in sales (up 3%) and net income of $15.05 billion (or $1.17 per share). Analysts on average expected the internet giant to report revenue of $68.9 billion and earnings of $1.07 per share, per financial data provider Refinitiv.

In January, Alphabet announced plans to cut 12,000 jobs across divisions — 6% of its workforce, marking its biggest layoffs to date — after the company, like others in the tech sector, had ramped up hiring during the pandemic. On Tuesday, the company announced that it recorded employee severance and related charges of $2.0 billion, representing the majority of expected costs associated with the layoffs. In addition, Alphabet recorded charges related to office space reductions of $564 million in the first quarter of 2023, and said it may incur additional charges in the future “as we further evaluate our real estate needs.”

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In February, Susan Wojcicki stepped down as YouTube’s CEO after nine years in the role, staying on at Alphabet in an advisory capacity. Stepping in to lead YouTube was Neal Mohan, previously the video platform’s chief product officer.

YouTube has been pushing Shorts, its short-form video feature similar to what TikTok’s app offers, in a bid to hold on to viewers. Google says YouTube Shorts generates more than 50 billion daily views on average and it recently program opened up Shorts to let creators receive a cut of revenue generated by their videos.

“Over the past two years we’ve seen periods of dramatic growth,” Alphabet and Google CEO Sundar Pichai wrote in a companywide memo in January announcing the layoffs. “To match and fuel that growth, we hired for a different economic reality than the one we face today.”

Pictured above: YouTube CEO Neal Mohan

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