If Alphabet pushed the rollout of its self-driving tech company even harder, Waymo could dominate a new market with the potential to generate more revenue than its ad business.
Inthe summer of 2015, when veteran auto executive John Krafcik was recruited to turn Google’s Self-Driving Car Project into a new business unit for Alphabet, cofounders Sergey Brin and Larry Page gave him an aspirational target.
“They asked me to build a great company, and then make it bigger than Google,” Krafcik, former CEO of Waymo, the project’s successor, told Forbes.
The idea was preposterous since it wasn’t clear when or if autonomous driving would be safe enough for real-world deployment, let alone at scale. A decade later, things have changed. Waymo robotaxis log about 300,000 paid rides worth at least $6 million every week in the five cities where they operate. That figure will rise exponentially in the next few years as its fleet grows and the service expands to 15 markets or more, including Miami, New York, Washington, DC, Boston, Nashville and maybe Tokyo, Waymo’s first international foray. On Tuesday the company said it’s testing in Denver and Seattle, following a blog post last Friday emphasizing plans to scale as quickly as possible.
“We’re entering a new chapter and accelerating our commercial expansion,” Waymo said. “If you see us driving in your city, it’s because we are working hard to serve you in the future.”
“I’d be spending as much money on this as on data centers, like tens of billions of dollars a year to expand their coverage and own market share very, very quickly.”
After 16 years of disciplined development, billionaire tech investor Vinod Khosla says it’s time to floor it.
“Waymo’s in a multitrillion-dollar global market and as far as I can tell, there are no competitors that are close,” Khosla told Forbes. “You’ve got a multi-trillion dollar business–frankly, it’s probably bigger than Google’s ad business by a lot–and they’re in a position to increase the lead over others. I’d be spending as much money on this as on data centers, like tens of billions of dollars a year to expand their coverage and own market share very, very quickly.”
Waymo’s benchmark self-driving car program is at an inflection point. In the robotaxi space, it has no meaningful U.S. competition at the moment, though Amazon’s Zoox hopes to change that with the looming launch of its service in Las Vegas. Globally, perhaps only China’s Baidu is shaping up to be a major rival. Elon Musk’s incessant boasts aside, Tesla is not a leader in the space. Its Austin robotaxi pilot, with safety drivers on board and remote operators standing by, is less impressive than the first fully autonomous car trip on public roads–which also took place in that city–when Waymo gave legally blind passenger Steve Mahan a solo ride in late 2015.
A Waymo robotaxi, with a human behind the wheel, testing in New York City, one of the many new markets the company is preparing to enter.
Tribune News Service via Getty Images
Ride revenue for Mountain View, California-based Waymo could hit $300 million this year, or triple what Forbes estimated the unit saw in 2024, based on current ride figures and an estimated average fare of about $20 by Obi, an app that aggregates real-time ride-hail prices.
“Each car, the amount of revenue it’s making would be shocking to most people.”
“Things are getting into very serious revenue territory,” Saswat Panigrahi, Waymo’s chief product officer, told Forbes, without confirming the annual estimate. “And the growth, how much effort we have to expend for that, each increment is getting easier.”
He pointed to the pace with which its weekly ride figure has grown, jumping from 50,000 a week in May 2024 to more than 250,000 a week in April, just as the service was entering Austin and before it launched in Atlanta, and continued expanding in Los Angeles, the San Francisco Bay region and Phoenix. And it’s getting better at squeezing out more rides from each vehicle in the fleet.
“Each car, the amount of revenue it’s making would be shocking to most people,” Panigrahi said, without elaborating. “Because it just continuously keeps delivering ride after ride. On a per asset basis, it’s doing really well. That’s making progress in terms of unit economics very, very positive.”
So much so that in busy markets like San Francisco, Waymo could soon move into the black. “Not making specific statements about if we’re positive or not, but what I can tell you is that yes, key markets are showing us that we are,” Panigrahi said.
Waymo is also winning loyal fans. The customer retention rate on its ride-hail app is higher than Lyft’s, with the gap between the two at about 6%, based on transaction data tracked by consumer spending research firm Indagari. Waymo’s customer base is also wealthier than Lyft’s, with 65% of its riders earning over $100,000 annually compared with 50% for Lyft, according to Indagari.
‘End Of The Beginning’
Over the past 16 years, Waymo has received at least $12 billion from parent Alphabet and outside investors. Receiving tens of billions of dollars more in immediate additional funding would accelerate Waymo’s ability to scale its fleet globally, onlookers argue. Right now, it operates about 2,000 electric robotaxis, not even a drop in the bucket in a global taxi and ridehailing market comprising millions of vehicles. But just how much faster Waymo could scale if it were to have such resources isn’t entirely clear. Expanding into new regions too quickly increases the likelihood of serious accidents, including fatal collisions that Waymo wants to continue to avoid.
“Getting the car working and deployed for real, like Waymo has done, is the first 99% of the effort. But scaling up is the next 99%.”
“To investors out there saying ‘go, go, go,’ I’m not sure they appreciate that Waymo is still nearer to the start of the journey than the end,” said Phil Koopman, a Carnegie Mellon professor emeritus who researches autonomous driving systems. “Getting the car working and deployed for real, like Waymo has done, is the first 99% of the effort. But scaling up is the next 99%. People think they’re almost there, but the answer is no. To be Churchillian about it, it’s the end of the beginning.”
Tekedra Mawakana, Waymo’s co-CEO since April 2021, won’t directly respond to calls for greater funding and speed. “We’re focused on scaling safely,” she said by email. “Alphabet is an incredibly strong parent company and our lead investor, and shares our vision to scale our safety-critical technology across U.S. and international cities, as well as additional business lines over time.”
Waymo, unlike Musk, has avoided overhyping its service, never announcing hard targets for how soon it can scale up or financial goals. Alphabet CEO Sundar Pichai’s restraint in talking about the unit’s future was notable during the tech giant’s July results call. Waymo “is testing across more than 10 cities this year, including New York and Philadelphia. We hope to serve riders in all 10 in the future,” he told investors.
“The success we’re seeing today from Waymo builds on years of cutting-edge AI work at Google and Alphabet – from transformers, to reinforcement learning, to computer vision – and reflects our ability to deeply invest in solving technology problems for our users and customers,” he told Forbes by email.
It’s a cautious statement, unsurprising from a public company CEO. But Khosla argues Waymo needs startup energy. “They have an abundance of caution. That’s a good thing for safety. They have a very high bar for safety and they don’t need to be as risky as Tesla Robotaxis but they can take more risks,” he said. “They’ve done a great job of getting the service up and running, the technology up and running, the operations up and running. But they haven’t done what a startup would do: Pour money in and not worry about cash flow while they’re still in the company-building phase.”
The “tophat” on Waymo’s robotaxi is loaded with multiple laser lidars, radars, cameras and audio sensors
Waymo
Still, Waymo has been trying to dramatically cut the costs of its high-tech vehicles, hardware and fleet operations. The Jaguar I-PACE electric SUVs it uses aren’t cheap, with the base vehicle costing about $65,000. Add 13 cameras, four laser lidar sensors, six radar units, external audio receivers, thermal cameras and a computing system and Forbes estimates each robotaxi likely costs a total of $80,000 or more to get on the road (Waymo declined to comment on the figure). A growing network of human workers and depots to support the ride service adds more cost, making it unclear when or if the Waymo One service will move into the black.
Khosla doesn’t think that should be the main consideration now. “Wall Street analysts are a little too cautious on measuring Alphabet on cash flow. In the tech world, share matters,” he said. “If by deploying $10 billion or $20 billion a year for three or four years, they could own a $1 trillion business, it should be a no-brainer. Waymo should be way more valuable than Uber.”
Co-CEO Dmitri Dolgov, a computer scientist who’s developed the AI behind the Waymo Driver since 2009, said improving the daily utilization rate of each robotaxi is enhancing the financial picture. Adding significantly cheaper vehicles, like Hyundai’s $40,000 Ioniq 5, and lower-cost sensors and computing system with Waymo’s “sixth-generation” hardware set later this year can push that even further.
“The cost of the vehicle and self-driving hardware, amortized over the lifetime of hundreds of thousands of miles, is one of the many contributors to the unit economics of our service that we’re focused on,” Dolgov said by email. “Across over five generations of hardware and thousands of vehicles on the road, we’ve consistently reduced the cost of our sensors and compute while improving their capabilities.”
Co-CEOs Tekedra Mawakana, left, and Dmitri Dolgov.
Waymo
More changes are coming for Waymo’s hardware, manufactured by Alphabet’s global suppliers, that will bring a “step-function” in cost reduction and increased economies of scale as the fleet expands, he said, without providing details.
Service Partners
Beyond just adding more, lower-cost vehicles, Waymo will need an increasingly vast network of charging and service depots to keep its growing fleet powered up and clean. And it’s increasingly turning to outside partners including Uber, Avis and Moove.io to handle those operations. Over time, rather than owning a rapidly expanding fleet itself, the company may shift to a franchise system, allowing partners to handle operations in new markets.
The first test of that could come from African mobility fintech Moove.io, which handles fleet operations for Waymo in Phoenix and is to do the same next year when the service launches in Miami. In July, Bloomberg reported the Nigerian company, led by CEO Ladi Delano, was raising $1.2 billion in part to buy a Waymo fleet to expand its operations in the U.S. Delano declined an interview request, though a person familiar with the matter confirmed the report.
“We’re focused on learning as much as we can as we scale more rapidly,” said Mawakana, without commenting on the Moove.io report. Service partners like Moove, Uber and Avis are helping Waymo expand faster than if it did everything on its own, and “as we bring our service to more people, we’ll continue to explore different types of partnerships,” she said.
“We wish we had a service like that in the French countryside to go shopping and remain social while not driving ourselves.”
Nicole Gavel, Waymo’s head of business development and partnerships, is trying to figure out the best ways to do that. “In the beginning, when something’s never been done before, you have to do everything yourself. It wasn’t as if in the early days we could go out to the market and say, ‘okay, who’s doing AV fleet operations?’” she said.
But things have evolved to the point Waymo can hand fleet operations over “to a strategic partner who has similar incentives to us to grow the business, to make sure the cars are busy, highly utilized, and get this out to more people and more places,” she said. “In the future, there are more parts of the value chain that we can start to entrust to other entities.”
Even with bigger funding and more partnerships, it’ll take many years for Waymo to become as ubiquitous globally as ridehail services like Uber or taxis. But it’s likely to be well-received when it is.
“Waymo doesn’t check its phone while driving and uses turn signals when turning,” said Jean-Pierre and Annie Breugnot, retirees in their 80s from rural Migennes, France, who tried the service while visiting family in Los Angeles this summer. “We wish we had a service like that in the French countryside to go shopping and remain social while not driving ourselves.”
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