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Three Things Alphabet Investors Should Know about Waymo
By: Market Realist | December 27, 2019

Currently, Waymo is one of Alphabet’s (GOOGL) most visible Other Bets components. During Alphabet’s earnings calls, executives frequently provide updates on Waymo’s progress and development plans. In the company’s third-quarter call, Alphabet CFO Ruth Porat provided an update on Waymo’s rollout of the fully autonomous Waymo One service. The service was launched in pockets of Phoenix, Arizona, a year ago.

Alphabet relies on its Google unit, which in turn relies on advertising, for its revenue. Increasing regulatory scrutiny of Google’s advertising business has forced Alphabet to think about diversifying its revenue. Intensifying competition for advertising dollars has also impacted its revenue.

This is where Alphabet’s Other Bets segment comes into the picture, namely Waymo. Here are three takeaways for Alphabet investors regarding Waymo as the year draws to a close.

Alphabet stock has gained since Waymo One launched

In the monetization of its self-driving technology, Waymo chose ride-hailing as its first business. But it is also considering venturing into other businesses.

Waymo launched its Waymo One ride-hailing service on December 5, 2018, challenging Uber Technologies (UBER) and Lyft (LYFT). Currently, the ride-hailing market presents a huge revenue opportunity for Waymo and its parent, Alphabet. The global ride-hailing market was worth $36 billion in 2017 and is on course to reach $285 billion by 2030.

Alphabet stock has gained 28% since Waymo One launched. Since their IPOs, held months after the Waymo One launch, Uber and Lyft stocks have fallen 26% and 42%, respectively.

Waymo has begun rolling out its fully autonomous ride-hailing service. The rollout could reduce Waymo’s dependence on human drivers and open cost-saving opportunities in the taxi business.

Waymo eyeing the $6.3 trillion trucking market

Waymo is looking beyond ride-hailing as it works to grow its revenue and reduce Alphabet’s reliance on advertising. Outside ride-hailing, Waymo has set its sights on trucking, a multitrillion-dollar industry. The global freight trucking market is on course to expand to $6.3 trillion by 2025 from $3.8 trillion in 2016.

International expansion and technology licensing

Alphabet’s Waymo sees even more ways to make money from its self-driving technology. The other opportunity it sees is licensing its technology to companies that want to build self-driving cars. And there are many potential clients out there—Uber, for one, is facing tough choices in its self-driving program. As it seeks new markets for its technology, Waymo is about to expand internationally with an engineering hub in Europe.

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