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Alphabet lost a billion on its moonshots this quarter

Alphabet lost a billion on its moonshots this quarter


Has Google’s plunge into hardware moved the needle?

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Google Unveils New Products, Including New Pixel Phone
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It was another solid quarter for the search giant. Analysts were expecting revenue to jump around 18 percent to more than $25 billion. Alphabet bested that with revenue of just over $26 billion, up 22 percent over the same period last year. Some analysts had predicted income of $9.64 per share, a new record for profit in a single quarter by the company. Alphabet fell a little short of that, notching $9.36 per share, which translates to a profit of $6.59 billion.

Alphabet’s “Other Bets” division, which includes everything outside Google and YouTube, managed to reduce its losses. It lost $1.21 billion in the fourth quarter of last year, and just $1.08 billion for the same period in 2016. Of course, the improvement did not come easy. In an effort to improve financial performance Alphabet has spun out its driverless car project into a standalone company, Waymo. And as financial goals become more demanding, many of its high-profile moonshots, including Google Glass, Project Loon, Project Wing, and Google Fiber have lost key executives.

As always the core of Google’s business, and thus Alphabet’s revenue, is advertising. The biggest areas of growth this quarter — YouTube, mobile, and programatic advertising — didn’t change the ongoing trend. When asked, Google decline to give any solid numbers on signups for its YouTube Red subscription service.

But Google, like Amazon and Microsoft, has been banking on cloud services to drive its future revenue growth. “And as we head into 2017, I expect Cloud to be one of our largest areas of investment and headcount growth,” said CEO Sundar Pichai on last quarter’s earnings call. This quarter Pichai highlighted data analytics and security as two verticals where he belives Google’s offerings are emerging as the industry leader. Much of the progress here is driven by artificial intelligence, and Pichai said the company had over 350 product launches in 2016 which were powered by advances in machine learning.

But the company has also moved aggressively into hardware, producing its own line of Pixel smartphones and the Google Home smart speaker which competes directly with Amazon’s Echo. No specifics were provided on sales. Pichai did say that he sees personal computing moving beyond a device or two. He believes the company’s strength in voice control means its well positioned for a world in which computing is available in whatever context - phones, homes, televisions, and cars, work, etc - a consumer might find themselves. “It’s really important for us to work at the intersection of hardware, software, and services,” said Pichai on today’s call.