Alphabet Bets On Visionary Futurist Projects, Investors Should Bet Too

  • In the Q3 2015 Earnings Conference Call, Alphabet stated a clear commitment to highly imaginative, visionary, long-term projects.
  • Alphabet will increase capital expenditure on Other Bets, including Fiber, self-driving cars, life sciences, and ambitious projects ranging from AI to quantum computing.
  • Alphabet is betting on new technologies to tackle major problems in the world, but investors should rest assured that it will continue to make money along the way.

Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), the company formerly known as Google, blew past estimates on both the top and bottom lines. It's worth noting that Alphabet is stating a clear commitment to highly imaginative, visionary, long-term projects that could have a really big impact.

Alphabet Earnings

In August Amigobulls reported on the creation of Alphabet, a new holding company that is now the parent company of Google Inc. and other Google's companies and initiatives, and oversees their operations. The reorganization separated Google's main money-making businesses from the long-term projects and visionary initiatives.

Alphabet was recently created, and therefore the Q3 2015 Earnings Conference Call was mostly focused on Google’s original structure, which reported a larger-than-expected profit of $4.7 billion on $18.7 billion in revenue. From now on, Alphabet will report revenues, profitability, and Capital Expenditure (CapEx) for both Google and a category dubbed “Other Bets” that combines the company’s other businesses. "Specifically, we intend to disclose for both Google and Other Bets revenues profitability and CapEx," said Ruth Porat, Senior Vice President and Chief Financial Officer.

"We intent to provide additional detail for Google on the one hand, and all the other Alphabet businesses on the other hand," Porat added. "We refer to those other Alphabet businesses as Other Bets. We expect Other Bets to include among others Access and Energy, Nest, Life Sciences, our investment arms and X, which is where driverless cars and certain other incubation efforts reside." Porat added that the Other Bets include earlier stage businesses, believed to have significant longer-term revenue potential.

The Other Bets

Capital expenditure related to Other Bets is expected to increase through next year. The most significant increase will come from the division of Alphabet working on technologies related to energy and Internet access, which includes the Google Fiber project that offers high-speed, low-cost broadband in several U.S. cities.

Google, now Alphabet, been often criticized for its long term projects with possible return after ten years or more - and investments in emerging technologies still on the drawing board. I totally disagree, because if even one "moonshot" works it can recover the cost of all the others and make a handsome profit on top of that. The company has a good track record for ambitious projects that work. The Internet itself was dismissed as a visionary non-business in the 1990s, but it changed the world and Google made a lot of money as a result.

"We are just beginning to scratch the surface," said Sundar Pichai, CEO of Google, Inc. "We know that computing transforms people’s lives, we’ve gone from the PC revolution to the Internet revolution to the mobile revolution. And 10 years from now, everything will be different again in ways no one can predict. Our vision is for Google to remain a place of incredible creativity and innovation that uses a unique technical expertise to tackle big problems and create that future." Pichai pointed out that investments in machine learning and artificial intelligence are a priority and will power new advances in voice search, translation, and much more.

Investment In Other Bets To Go Up

The conference call  leaves little doubt that Google intends to bet on visionary projects that can deliver highly imaginative solutions for big challenges with a potential world-changing impact. "What we want with Alphabet is to be an extraordinary magnet, the best magnet for entrepreneurs, and to be an accelerant for their development," said Porat in the final Q/A session. "And to give them that the kind of environment where we can continue to thrive, and therefore build great businesses that generate tremendous returns as well for our stakeholders on top of solving big problems."

The prestigious MIT Technology Review notes that Alphabet is preparing to ramp up spending on its most ambitious projects. Visionary Other Bets include Artificial Intelligence (AI), quantum computing, virtual and augmented reality, home devices, Google’s X lab that works on projects such as self-driving cars, Project Loon, which uses stratospheric balloons to deliver cellular Internet in rural areas of the world, and a life sciences group where immediate projects include an electronic contact lens and long-term projects include anti-aging and visionary life extension therapies.

Alphabet Stock A Buy

Google co-founder Larry Page, now Alphabet CEO, said previously that the creation of Alphabet is intended to allow the company to more easily use new technologies to tackle major problems in the world and make money along the way.

In fact, despite the inevitable accusations of spending too much money on long-term projects, investors should rest assured that Alphabet will continue to make money along the way, because making money with world-changing projects is in its DNA. Alpabet's stock - still trading as GOOG and GOOGL - remains a promising buy-and-hold and a key part of a tech stock portfolio.

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