Alphabet’s ‘Other Bets’ Lose $3.56B in 2015

Includes Results From Google Fiber, Nest, Self-Driving Cars
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Google’s new parent company, Alphabet, provided some new financial detail about its “Other Bets,” those so-called moonshot projects and bets that include self-driving cars and Google Fiber. They are, as expected, losing money.

For calendar year 2015, those Other Bets lost $3.56 billion, with revenues of $448 million, compared to a loss of $1.94 billion and revenues of $327 million in 2014. Capex for Other Bets reached $869 million in 2015, primarily reflecting spending on Google Fiber, versus $501 million in 2014. Capex for Other Bets will rise in 2016 thanks in large part to Google Fiber's expansion.  Google Fiber offers service to parts of Kansas City (Mo. and Kan.);  Provo, Utah; and Austin, Texas. It has buildouts started in Salt Lake City, San Antonio, Nashville, Atlanta, Raleigh-Durham and Charlotte, and is exploring deployments in Chicago; Los Angeles; Portland, Ore.; San Jose, Irvine and San Diego, Calif.; Phoenix, Ariz.; Oklahoma City; Louisville, Ky.; and Jacksonville and Tampa, Fla.

Capex "obviously increases as we execute in a growing number of cities," Ruth Porat, Alphabet’s CFO, said on Monday's earnings call. "One of the main things that also affected 2015 is the rollout was really measured as we worked to enhance the construction process and efficiency, doing things like developing relationships with cities and establishing protocol with construction partners, but we have more cities announced. And, obviously, as we execute on those, that takes more capex, as well."

The separation of those financial results come about four months after Google reorganized under its new holding company, Alphabet.  Alphabet now reports two segments – Google and Other Bets.  Google includes its primary Internet products, including search, advertising, maps, YouTube, apps, cloud, Google Play,  Android, and devices like the Chromecast, Chromebook and Nexus.  Other Bets includes Google Fiber/access, Nest, Calico, Verily (formerly Google Life Sciences), GV (formerly Google Ventures) and Google Capital X.

On a combined basis, Alphabet posted Q4 revenues of $21.32 billion, up 18%, and better than the $20.77 billion expected by analysts. The company posted earnings of $8.67 per share, which beat expectations of $8.09. Those results reflected momentum in mobile search, at YouTube,  and with programmatic advertising, Porat said.

Porat said the bulk of revenues from Other Bets originated from Nest, Google Fiber and Verily.  She also stressed that Other Bets results will be uneven in the near-term, and asked company watchers to assess those results on an annual, 12-month rolling basis.

Though virtual reality is part of the Google segment, company CEO Sundar Pichai said it’s still early days for the platform. “Cardboard,” Google’s inexpensive VR viewer, “is just the first step,” he said, noting that the company and its partners have shipped more than 5 million of the viewers so far.