ALL BETS ARE OFF

Google is about to report earnings as Alphabet for the first time. Here’s what we’ll learn

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Today (Feb. 1) is the day we finally get a clearer view of what Alphabet, Google’s new parent company, is really made of. After the US market closes, Alphabet will announce its fourth-quarter results, its first earnings report since the company underwent an elaborate restructuring last year.

When the company first announced the organization overhaul in August 2015, it promised improved “transparency and oversight of what we’re doing.” Last week, Alphabet finally revealed what the changes to its financial reporting will entail. Alphabet will break out two segments in its earnings report: its core Google business, and everything else under the bucket “Other Bets.”

Here’s what they include:

Segment What it includes
Google Search, ads, commerce, maps, YouTube, apps, cloud, Android, Chrome, Google Play, Chromecast, Chromebooks, Nexus
Other Bets Google Fiber, Calico, Nest, Verily (formerly Google Life Sciences), Google Ventures, Google Capital, Google X

For each segment, Google will disclose revenue, operating income, stock-based compensation, capital expenditures, as well as depreciation, amortization, and impairments. In addition to financials for the fourth quarter, it will provide comparable data for the year-ago period and annual data for 2013, 2014, and 2015.

(Alphabet)

While the changes provide some clarity around this Alphabet soup, it falls short of what investors actually want: a detailed breakdown of how much money certain properties, such as YouTube and Android, bring in. For that, they’ll have to rely on estimates provided by third parties. (A recent Credit Suisse note suggests estimates that YouTube and Google Play accounted for approximately 16% of Google’s revenue in 2015. Meanwhile, a lawyer for Oracle revealed in court this month that Android has reportedly generated $31 billion in revenue since 2008.)

Because those “Other Bets” are reported in aggregate, the breakout won’t “provide all the transparency investors need to value them,” Brian Wieser, an analyst at Pivotal Research Group, said last August.

But they’re happy to take what they can get. Already, analysts are optimistic about the stock, overall rating it as a buy and expecting, on average, $16.89 billion in revenue for the fourth quarter, up 17% from the year ago period, according to FactSet.

“The best we can hope for is that investors see [Other Bets] more clearly…but largely ignoring the losses,” Deutsche Bank’s Ross Sandler wrote in a Jan. 13 note.

Read this next: Alphabet is within arm’s reach of overtaking Apple as the world’s most valuable company

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