Driverless cars, wifi-enabling hot air balloons and internet-connected thermostats are not the usual components of strategy updates one would expect to find in a run-of-the-mill company results statement. But Alphabet (US:GOOGL) isn't any old corporate. Not only has it leapfrogged its rival tech giant Apple to become the world's most valuable public company, but the rebranded Google has now released some financials behind its more outlandish ambitions - or 'moonshots'.
The details are important not only to understand what the company is aiming to develop, but also because they alleviated investors' fears about frivolous spending and highlighted the strength of its core search and advertising business.
Clockwise from top left: Google Glass, self-driving cars, Project Loom and a Nest thermostat
Before delving into Alphabet's performance in 2015, it's important to remember this isn't a typical tech company. Management's opening comment on its latest results didn't dwell on "maximising returns to shareholders" or "driving growth across the business".
Instead, finance chief Ruth Porat said: "We're excited about the opportunities we have...to use technology to improve the lives of billions of people."
That chimes with the group's mantra of "Don't be evil" as well as its goal of creating products and services that provide tangible value to humanity: its Google search engine, YouTube video-streaming platform and Android mobile operating system are some examples.
Better to try and fail...
Alphabet has grabbed headlines for years with its more outlandish businesses. Those include self-driving cars, hot air balloons that can deliver wireless internet to far-flung corners of the world, researching ways to slow aging, contact lenses for diabetics that can measure the amount of glucose in their tears and the Nest range of thermostats, smoke alarms and other internet-connected devices for the home.
It turns out those operations make up a very small portion of the company. Alphabet's 'other bets' division posted a 37 per cent rise in sales to $448m (£311m) in 2015 - less than 1 per cent of total turnover - and nearly doubled its operating loss to $3.1bn. Capital spending rose nearly three-quarters to $869m, which amounts to less than a tenth of the group total.
Meanwhile, the main Google division - which houses the eponymous search engine, the Chrome web browser and operating system, Android, YouTube and other advertising businesses - benefited from growth in online video consumption, mobile search and automated advertising. Sales rose 14 per cent as a result, driving operating profits up 23 per cent to just over $28bn.
... but not at any cost
Despite Alphabet's scattergun approach and range of expensive ventures (see below), it kept a tight hand on costs. Overall capital spending, which tripled between 2011 and 2014, fell by a tenth to about $9.9bn. That likely reflects the arrival of Ms Porat in 2015; the former Morgan Stanley finance chief was expected to improve fiscal discipline and whip the company's financials into shape.
Above: Alphabet's operating structure.
Pivotal Research expects Alphabet's sales to rise 14 per cent to $85.5bn this financial year, driving EPS up a tenth to $32.54 (from $75.0bn and $29.59 in FY2015).
