Google’s hardware division, which includes the Pixel brand (phones, tablets and laptops), the Nest line (smart home devices) and Home products (smart speakers and smart displays), will gross nearly $3 billion in profits this year according to Mahaney. That is based on a gross profit margin of 34%, but accounts for only 4% of the company’s gross profits. The exact estimate calls for a gross profit of $2.982 billion, or a 55% increase over the 2017 figure. RBC sees the growth dropping off so that by the time 2021 rolls around, gross profit will be up only 16% from the previous year.
Because Google’s hardware allows it to serve more ads to consumers, it is an important part of the company. Still, most brokerage firms, including RBC, know what brings home the bacon for Google investors. For example, Morgan Stanley analysts recently said that Google should give away the Home Mini smart speakers for free to increase the number of ads it serves to consumers.