The alphabet is on a mission to be more than an ad company and is currently focusing on three groundbreaking ideas for doing so: Wing, Waymo and Loon.
Just last week, Alphabet's Waymo freelance carmaker announced it was opening a factory in Detroit to build freelance vehicles before a wider launch of its ride service; his drone delivery company, Wing, was allowed to start delivering products in the US; and Loon, the internet balloon company announced a $ 125 million investment from SoftBank before launching a service in Kenya.
But the cost of breaking that ground is appearing on the bottom line of the alphabet. Unlike Google's advertising business, all three of these new businesses have completely new pieces of hardware. Waymo needs cars and storage facilities; Wing requires drones and loaders; and Loon needs balloons and connectivity infrastructure.
Alphabet's operational losses for its Other Bets – the term used to list all of its early-stage plans and businesses – increased nearly $ 300 million in the first quarter of 2019 compared to the same period last year, the company said in a statement. quarterly profit. today (April 29). The alphabet lost $ 868 million in the Other Bets category in the quarter, compared to $ 571 million in the same quarter of 2018.
Losses on other bets are not abnormal for the Alphabet – the company has long used its gigantic advertising business to stimulate its ideas that have not yet made money. However, Wing, Waymo and Loon are ready to launch for real customers. That means investing in more than just research and development, but a huge amount of new costs related to bringing a product to bear. Think of customer support, marketing, office space, HR departments, and virtually every other capital expense you can imagine.
Investors also did not find the rest of the Alphabet earnings. The company posted a slowdown in ad sales, recording only a 15% increase in sales in the quarter, compared to 24% in the same period last year. And while the company generated $ 36.3 billion in total revenue this quarter, its growth rate slowed to 17%, compared with 28% a year ago. Shares of the company fell more than 7 percent to $ 1,203 in after-hours trading.