Please ensure Javascript is enabled for purposes of website accessibility

Alphabet Discloses Nest Financials for the First Time

By Evan Niu, CFA – Updated Apr 24, 2018 at 12:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The smart-home technology subsidiary had a good 2017.

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 -1.98%) (GOOGL -1.82%) 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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and AMZN. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$96.15 (-1.98%) $-1.94
Alphabet Inc. Stock Quote
Alphabet Inc.
$95.65 (-1.82%) $-1.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.