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Parsing Alphabet’s 4Q17 Results

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Part 8
Parsing Alphabet’s 4Q17 Results PART 8 OF 7

Parsing Alphabet’s Other Bets Business

Other Bets revenue grew 56%

Alphabet’s (GOOGL) Other Bets continued to grow in 4Q17 and accelerated from the previous quarter. Other Bets is the collective name of a portfolio of Alphabet businesses that are currently not significant on their own. They include Waymo (autonomous driving), Nest Labs, Verily, and Google Fiber.

Other Bets revenue was $409 million in 4Q17, a growth of 56.1% YoY (year-over-year). Growth accelerated from 53.3% in 3Q17.

Parsing Alphabet’s Other Bets Business

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Other Bets: Loss narrowed

Other Bets revenue grew in 4Q17, but the businesses also cut their losses that quarter. The loss for Other Bets was $916 million in 4Q17 compared to a loss of $1.1 billion in the year-ago quarter.

Since Other Bets businesses are currently loss-making operations, Alphabet’s Google unit foots their bills. As Other Bets revenues grow to cover a significant portion of the losses in the operations, the pressure on Google earnings could reduce, potentially leading to better profits for Alphabet.

Major Other Bets revenue contributors

Nest Labs, Verily, and Google Fiber are the primary contributors to revenues for Other Bets. Nest Labs is focused on home automation, developing products such as programmable thermostats and smoke detectors. Google Fiber is focused on connecting households to high-speed fiber Internet. Verily is Alphabet’s research arm devoted to life sciences.

Last year, Verily was selected alongside Apple, Fitbit (FIT), Johnson & Johnson (JNJ), Samsung (SSNLF), and Roche (RHHBY) to participate in an FDA (U.S. Food & Drug Administration) pilot program that could lead to speedy approval of digital health products.

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