Google just posted some tremendous financial results, causing shares of its parent company Alphabet to surge more than 5 percent and surpass Apple in market cap to become the world's most valuable company.
But one big question on everyone's mind is this: How well are the firm's moonshot projects — such as the self-driving car and hovering Internet balloons — doing?
For the first time, Alphabet has released some information about its so-called "Other Bets," which include its X laboratory, Google Fiber, and a number of additional ventures. Here's the one chart you need to see to grasp where they stand.
What this shows is that Alphabet is losing a ton of money on these initiatives. Last year, the Other Bets collectively pulled in $448 million in revenue, mostly from Nest and its smart thermostat business; Google Fiber's high-speed Internet service; and Verily, Alphabet's life-sciences program — but expenses from the other Other Bets wound up costing Alphabet more than $3.5 billion.
Some of those losses were from projects such as Project SkyBender, a newly uncovered experiment aimed at using solar-powered drones to deliver ultra-fast Internet from the air. At a secret testing ground in New Mexico, Alphabet has been tinkering with the crafts to test the transfer of data at speeds much faster than is possible with 4G networks, according to the Guardian.
It's no surprise to see these projects dragging down Alphabet's performance. One of the main reasons why investors were excited when the company announced its corporate restructuring was that they were finally going to see Google's core financials as they truly were. And compared to Google's rocketing revenues, the money Alphabet spends on things like floating Internet balloons and extending the human lifespan does seem like pocket change.
But this doesn't mean the Other Bets will be exclusively where Alphabet experiments with things from now on, said Ruth Porat, Alphabet's chief financial officer, in a conference call Monday.
"We continue to invest in longer-term opportunities within both Google and Other Bets," Porat said.
That means we can expect Alphabet to keep funneling money into things like cloud computing, machine learning and artificial intelligence, and virtual reality, Porat added, even as the Other Bets become more ambitious.
What remains to be seen is whether all this transparency surrounding the Other Bets will put more pressure on Alphabet to abandon costly projects. Previously, those costs were hidden from shareholders. But now, they'll be exposed to the same financial pressures that govern investors' attitudes toward the core search and advertising business.