It's been quite a month for investor transparency. Not only did finally confirm last week that it now has over 100 million Prime members, Alphabet (GOOG 0.92%) (GOOGL 0.93%) shareholders are now getting a glimpse of subsidiary Nest's financial results for the first time, after the holding company reported first-quarter results yesterday evening.

The revelation is thanks to Nest becoming part of Google again in a move intended to consolidate the company's growing hardware operations under one corporate umbrella. Google has emerged as the most viable competitor to Amazon's dominating lead in smart-home technology.

Nest smart thermostat on a wall

Image source: Nest.

Nest generated $726 million in revenue last year

Historically, Nest was part of Alphabet's "Other Bets" segment, and investors have long suspected that the maker of smart thermostats and other smart-home products represented the majority of that segment. With the corporate restructuring, Alphabet has provided restated financials for its Other Bets segment.

Comparing the figures as originally reported to the restated versions, shareholders can now see that Nest generated $726 million in revenue throughout 2017, while enjoying a nice seasonal bump over the holidays. When I think of stocking stuffers for the holidays, I don't tend to think of smart thermostats or smart smoke detectors, but maybe that's just me.


Other Bets Revenue as Reported



Q1 2017

$244 million 

$132 million

$112 million

Q2 2017

$248 million 

$97 million

$151 million

Q3 2017

$302 million 

$117 million

$185 million

Q4 2017

$409 million 

$131 million

$278 million


$1.2 billion

$477 million

$726 million

Data source: SEC filings.

We can do the same exercise to calculate Nest's operating loss as well.


Other Bets Operating Income/(Loss) As Reported



Q1 2017

($855 million)

($703 million)

($152 million)

Q2 2017

($772 million)

($633 million)

($139 million)

Q3 2017

($812 million)

($650 million)

($162 million)

Q4 2017

($916 million)

($748 million)

($168 million)


($3.4 billion)

($2.7 billion)

($621 million)

Data source: SEC filings.

The bad news is that this all appears to be a one-time peek. Going forward, Nest will be aggregated within "Google other revenues," which includes other hardware products like Pixel phones, Google Cloud, and digital content sold through Google Play. The search giant reported $14.3 billion in other revenues last year, and retroactively adding Nest's sales to that segment brings Google other revenues to just over $15 billion for 2017.

The widening operating losses are understandable within the context of Nest's growing portfolio of smart-home products, which require considerable R&D investments. The company doubled its portfolio in September, introducing an alarm system (Nest Secure) and video doorbell (Nest Hello), among other devices. When you're competing with a rival that's willing to absorb massive losses to dominate a market, you might have to do the same to keep up.