Revenue from Google’s hardware and Play Store businesses rose more than $1 billion year-on-year to $4.4 billion in Q1, but CEO Sundar Pichai (pictured) said it will take a few more years to scale the hardware segment to where the company wants it to be.
Speaking on parent Alphabet’s Q1 earnings call, Pichai said Google now has all the end-to-end capabilities of a top-notch hardware organisation in addition to the software components it already had. But he noted time is a necessary ingredient to effectively scale the business, which includes Google’s Pixel and Nest product lines.
Part of Google’s long term hardware plan includes “scaling up our go-to-market strategies in the US and internationally so we can drive adoption,” he added.
The CEO estimated it will take two to three years for the hardware segment to grow to the level where Google would like to see it, but did not elaborate on what targets the company is aiming for.
In Q1 2018, Google’s hardware segment made up just a fraction of Alphabet’s total revenue, which grew 26 per cent year-over-year to $31.1 billion. The vast majority ($26.6 billion) of Google’s earnings once again came from advertising revenue, driven by mobile search.
Pichai said the company is already working on the next evolution of mobile search and its artificial intelligence (AI) powered Google Assistant, which he revealed will involve helping users complete tasks rather than just supplying them with information.
Alphabet’s net income of $9.4 billion in the recent quarter was up from $5.4 billion in Q1 2017.
Traffic acquisition costs (TAC), the fees Alphabet pays to partners to place advertisements on websites and smartphones, continued an upward march, hitting $6.3 billion. But Alphabet CFO Ruth Porat said while the company expects to see TAC continue to increase as a percentage of revenues, it anticipates growth will slow beginning in the current quarter.