Memorandum
Alphabet reported 2Q16 earnings today in a call led by CFO Ruth Porat and Google CEO Sundar Pichai. There was no mention of Verily or its three diabetes partnerships: (i) next-gen CGM with Dexcom (launch on schedule for 2018); (ii) glucose sensing contact lens with Novartis (continued absence of focus in Novartis 2Q16 report as well); and (iii) new sensors, wearable devices, and better software with Sanofi. Similar to the Alphabet 1Q16 report, management only shared topline combined financials for all “Other Bets” – with a revenue of $185 million, generated mainly by Nest (smart home products), Fiber (super fast internet and TV), and Verily. However, Other Bets simultaneously reported an operating loss of $859 million, which Ms. Porat highlighted was an indication of Alphabet’s commitment to ongoing investment in long-term growth and innovation (a sentiment expressed by X Head Astro Teller in a NY Times article earlier this week). On a similar note, Mr. Pichai emphasized Alphabet’s devotion to machine learning and artificial intelligence (i.e. data analysis that teaches machines to learn from trends and customize results), stating it will be “the engine that drives our future.” Through advancing and deploring machine learning technology, device development and utility will be streamlined to fit unique consumer needs. We wholeheartedly hope this focus on machine learning translates to Verily’s diabetes partnerships, due to its potential to vastly improve diabetes treatment by intelligently and individually tailoring to patients’ lifestyles. (See more commentary from our 1Q16 report.) For now, we eagerly await further updates.
-- by Emily Fitts and Kelly Close