Alphabet’s ‘Moonshot Projects’ Lost $859 Million Last Quarter

Google's most extreme bets are starting to generate more sales -- but at a great cost.

Alphabet (GOOGL, Tech30), the parent company of Google, saw sales from its so-called moonshot projects hit $185 million in the quarter ending in June, more than doubling sales from the same quarter a year ago.

But the company is losing far more money from those efforts. Losses for "other bets," as Alphabet characterizes the segment, rose to $859 million for the quarter from $660 million a year earlier.

Those bets include risky, capital intensive projects like self-driving cars and Google Fiber, which delivers high-speed Internet. Most of Google's sales in this group are said to come from Fiber as well as Nest, and Verily, a life sciences division.

Those mounting losses may put a dent in Alphabet's pitch to Wall Street that it can be more responsible with its spending.

Nearly a year ago, Google officially became Alphabet. The corporate restructuring paved the way for Google's founders to acquire or build up businesses that could become the next Google. It also provides more financial transparency and accountability.

Under CFO Ruth Porat, hired last year from Morgan Stanley, Alphabet has worked to reign in expenses across the company, including in its riskiest divisions.

In fact, the added financial discipline is rumored to have contributed to Tony Fadell's decision to step down as CEO of Nest in June, years after Google acquired the connected device maker for $3.2 billion.

The losses from the "other bets" category" were more than offset by Google's continued growth in ad sales and app store revenue. Google sales grew 21% year-over-year, hitting $21.5 billion for the quarter, beating Wall Street estimates.

Alphabet's stock popped by 5% in after hours trading.

Brian Wieser, an analyst with Pivotal Research Group, wrote in an investor note this month that Google and Facebook (FB, Tech30) "are unambiguously the hegemonic players in digital advertising."

Facebook awed investors on Wednesday with its earnings report showing strong ad sales growth.

While Google's sales are growing, the company must show investors that it can make more money from ads served on smaller screens -- and keep overall costs in line.

CNNMoney (New York) First published July 28, 2016: 4:41 PM ET

Via Daring Fireball http://money.cnn.com/2016/07/28/technology/alphabet-earnings-google-moonshots/index.html