Google’s core search-and‑ads engine is under heavier scrutiny than at any time since the 2008 recession. Investors worry that AI chatbots will nibble away at high‑margin query volume and make cost‑per‑click math look quaint. My take: Search isn’t dying, but Alphabet is carrying far too much ballast to turn quickly. The fastest, simplest way to reassure the market—and to get regulators off its back—is to stop funding most “moonshots” and let a few self‑contained businesses stand on their own.
The bill for moon‑shooting keeps climbing
- $4.4 billion operating loss in 2024. Alphabet’s “Other Bets” segment (Waymo, Verily, Wing, Calico, Fiber, X, etc.) generated just **$1.65 billion of revenue while posting a ‑$4.44 billion operating loss. That loss was $349 million larger than 2023’s shortfall.
- $49.3 billion in R&D. Even after AI‑driven efficiencies, Alphabet plowed nearly 14 ¢ of every revenue dollar into R&D last year—more than the entire annual revenue of Zoom or Pinterest.
- Capital intensity is accelerating: management signaled $75 billion of 2025 cap‑ex, much of it GPU clusters that will depreciate in dog years.
Put differently, Google could erase every penny of Other Bets red ink by cutting R&D only 9 %. But instead of nibbling, it should surgically remove the distractions.
What’s worth keeping
- Waymo. Five million paid rides in 2024 and outside capital at a $45 billion valuation show a credible path to break‑even. Alphabet already earmarked $5 billion of additional funding; spin Waymo off with that war chest and let it raise the rest on its own balance sheet.
- Google Fiber. Small but EBITDA‑positive in Kansas City and Utah. Its cash‑flow discipline fits a utility‑style standalone better than a hyper‑growth parent.
Everything else—Verily’s sprawling health bets, Wing’s drone deliveries, Calico’s longevity quest, X’s perpetual skunkworks—soaks up talent and stock‑based comp with no visible pay‑back window. Shut them down, sell the IP, or partner with universities that specialize in basic research.
Break the company before Washington does
Regulators have already pried open Play billing, hounded Chrome cookies, and dragged ad‑tech into court. A voluntary breakup signals good faith and neutralizes the “platform plus content” critique. Think AT&T in 1984: after the breakup, the Baby Bells and Bell Labs flourished, long‑distance competition exploded, and AT&T’s market cap actually went up.
Proposed structure
| New Co | Assets / Focus | Why it wins |
|---|---|---|
| Google Search & Cloud | Search, Ads, Gemini, Cloud infra | Restores a pure AI/ads margin story and clarifies cap‑ex needs |
| YouTube | Ads + subscriptions (NFL Sunday Ticket, Music, TV) | Already at a $55 billion run‑rate; freed from Search cross‑subsidies it can bundle, license, and negotiate like Netflix |
| Waymo | Robotaxi + logistics | Access to autonomous‑vehicle capital markets; talent magnet without Alphabet stock overhang |
Let Verily et al. raise their own Series D if the science truly merits it.
The bottom line
Alphabet’s core businesses still gush cash, but piling speculative science projects on top of a maturing ad franchise muddies the story and inflates expenses just when the market is nervous about AI cannibalization. Spinning off YouTube and Waymo while shuttering or selling the rest of Other Bets could save $4‑5 billion a year, sharpen management focus, and defang antitrust attacks—no lobbyists required. In 2025, less moon‑dazzle and more daylight could be exactly what Google (and its shareholders) need.