Made by Google is in its third year, and the computer hardware industry is particularly enjoying the holidays. A slew of Google Home speakers, Home Hub smart displays, and other Assistant devices will likely be unboxing tomorrow morning following a flurry of deals. An investor predicts that Google will make about $ 3 billion in profit this year from computer hardware.
According to RBC Capital Markets (via CNBC), Google material is “starting to gain commercial traction.” Alphabet separates Google from divisions like Waymo and Verily in quarterly results, but areas like hardware are still lumped into one item called “Other Income” with the growing division of Google Cloud and the Play Store.
“Hardware remains a small, but important part of Google given its potential as a key growth axis and strategic cover for the business.”
The material helps Google diversify its revenue from ads only and serves as a way to push the latest AI features. As evidenced by the annual Made by Google event, Pixel phones are the first to receive new features like Assistant, Duplex, and Night Sight.
Last week’s analysis by the bank projects 2018 profit of $ 2.98 billion on revenue of $ 8.8 billion. A breakdown says $ 1.78 billion of that gross profit comes from the Pixel, while Home comes in second with $ 847 million. Nest follows at $ 245 million and Chromecast at $ 110 million.
In terms of revenue (before expenses deduct), the Pixel – including the Pixelbook – and Home are pretty close at $ 3.42 billion and $ 3.39 billion, respectively. However, that’s before the marketing and other costs are factored in. Meanwhile, we learned in the first quarter of 2018 that Nest had around $ 726 million in revenue last year.
RBC provides a forecast through 2021 that projects revenue of $ 19.5 billion and profit of $ 6 billion. Domestic revenues will start to overtake Pixel by next year, but phones and laptops continue to generate larger gross profits.
Assistant powered devices have benefited from the introduction of smart displays this year. CES 2019 is likely to be another big showcase for products that support the Google ecosystem and thus make purchasing Assistant a better proposition than the Amazon Alexa family. RBC estimates 43 million home devices in the United States, with Google surpassing Amazon for the first time in the first quarter of 2018, according to another forecast.
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