YouTube Subscriptions Are Growing Faster Than Ad Revenue

• Alphabet revenue and earnings topped analyst expectations, driving shares up 6.5% in after-hours trading
• YouTube’s ad revenue increased by 11% during the quarter, coming in at $9.88 billion.
• In the living room, U.S. viewers are now watching 200 million hours of YouTube content daily. As for YouTube Shorts, over 10 million channels are publishing daily shortform content as of March.

Alphabet now has over over 350 million paid subscriptions led by YouTube and Google One. Specifically, YouTube Music and YouTube Premium saw the largest quarterly increase in the total number of non-trial subscribers both globally and in the U.S. since YouTube Premium launched in 2018. The company shared this milestone on Wednesday as part of its first quarter earnings call.

In fact, revenue from YouTube’s subscriptions have grown faster than the platform’s ad division. By the end of the first quarter, YouTube Premium was fully launched in 23 countries. In the second quarter of the year, the company plans to launch the offering in more than a dozen new countries. As for the Alphabet’s other subscriptions, this past quarter was the strongest ever for Alphabet’s AI plans, primarily driven by adoption of the Gemini app.

It wasn’t just YouTube’s subscriptions that had a good quarter. Revenue from YouTube ads grew by 11% to hit $9.88 billion, which was driven by an increase in direct response advertising. In the past several months, YouTube has invested heavily in better connecting its creators to brand partners and adding clickable ads to YouTube Shorts, which likely contributed to the overall growth.

As for YouTube itself, viewers in the U.S. now watch 200 million hours of YouTube content daily in their living rooms, the company reported on Wednesday. YouTube Shorts has also taken off with over 10 million channels publishing shortform content daily as of March.

Overall, it was a strong quarter for Alphabet. Revenue for the quarter increased by 22% or 19% in constant currency, which accounts for foreign exchange rate fluctuations, to hit $109.9 billion. This is the 11th consecutive quarter where the company has seen double-digit revenue growth. A main driver of that growth was the Google Services division, which increased 16% to hit $89.6 billion. That was led by a 19% lift in revenue from Google search; a 19% increase in Google subscriptions, platforms and devices; and the afforementioned an 11% bump in YouTube ads.

The Google Cloud division also saw notable growth as revenue increased by 63% to hit $20 billion. That was largely due to an increase in Google Cloud Platform across enterprise AI solutions and enterprise AI infrastructure

Speaking of AI, Alphabet also saw an increase in research in development during the first quarter of the year. Costs related to R&D shot up 25.6% to hit $17 billion, likely related to the company’s continued investment in AI.

Alphabet also increased its capital expenditure guidance range for 2026. Previously, capex was predicted to range from $175 to 185 billion, but on Wednesday the company announced that its new predicted range is $180 to 190 billion. This bump has to do with Alphabet’s acquisition of the data center and energy infrastructure solutions company, Intersect.