With products like smart home speakers, Nest cameras and well-reviewed Pixel phones, Google hardware is selling and thriving, according to a report by CNBC.
RBC Analyst Mark Mahaney wrote a note to clients on Thursday (Dec. 20) and praised the company, saying its products have “gained critical success and are starting to gain material commercial traction.”
When Google reports earnings for hardware, it puts it in a category called “other revenue,” which includes the company’s cloud business and sales from the app store. Q3 saw significant gains for the company, with the category contributing around 14 percent of Alphabet’s total revenue (Alphabet is Google’s parent company). Advertising accounted for 85.8 percent.
RBC went on to say that Google’s recent successes with its hardware bode well for the company’s future, as its products continue to grow in popularity. The firm predicted that hardware will make a combined $8.8 billion and a profit of $3 billion. By 2021, that will rise to $19.6 billion and $6.1 billion in profit. There are also an estimated 43 million Google Home devices installed in the U.S., RBC said, and nine million around the world.
Even though the company has had some very public misfires, like Google Glass, hardware continues to be an important part of Google’s business.
“Hardware remains a small, but important, part of Google, given its potential as a key growth avenue and strategic hedge for the company,” Mahaney said. The analyst added that the true value of Google’s hardware business lies in the company using its AI technology and creating a way to serve ads to users.
While hardware continues to sell, Google has some services that it feels aren't ready for public consumption. Earlier this month, Google decided it wouldn’t sell its facial recognition products until it could be sure the tech wouldn’t be abused.
“Like many technologies with multiple uses, facial recognition merits careful consideration to ensure its use is aligned with our principles and values, and avoids abuse and harmful outcomes,” Kent Walker, senior vice president of global affairs, wrote in a blog post.