Autonomous ride-hailing service leader Waymo, part of Google-parent Alphabet, keeps adding to its resume with market expansions and technology advances. Yet Wall Street has yet to price in Waymo's momentum in the valuation of Google stock.
For investors, the big question is what milestone or breakthrough Waymo needs to achieve to spark Alphabet stock. Could it be a deeper partnership with Uber Technologies? Or, will Google create value for investors by spinning off the robotaxi pioneer?
Uber and Germany's Volkswagen on April 24 announced a long-term strategic partnership to deploy thousands of electric, autonomous ID. Buzz minivans in Uber markets, perhaps dealing a blow to a deeper Uber-Waymo partnership.
The big picture: Google's core internet search advertising business remains top of mind for investors. The impact of generative artificial intelligence and OpenAI's ChatGPT has yet to play out.
What's clear is that a boost from Waymo, cloud computing or YouTube would be a big plus for Google stock.
When Will Waymo Be Priced Into Google Stock?
Morgan Stanley analyst Brian Nowak framed the issue this way in a recent report: "While unlikely to be a near-term catalyst to Google's $1.8 trillion enterprise value as the market debates the future of internet search, we do believe that the long-term value of Waymo is not appreciated in Google's trading multiple." He added that Waymo could "drive multiyear multiple expansion," but the timing is unclear.
In October, Waymo raised $5.6 billion in a funding round that valued the company at over $45 billion. Alphabet, venture capital firm Andreessen Horowitz, Silver Lake, Tiger Global, Fidelity and T. Rowe Price took part in the funding round.
Evercore ISI analyst Mark Mahaney told IBD in an email that Waymo needs a bigger funding round to be priced into Google's valuation.
"If I can gain confidence that it was a $100 billion-plus asset in terms of value, then it would be material for me," he said. "I think we will see this in two to three years."
Alphabet's growing investments in Waymo show that it's confident in a long-term payoff. In mid-2024, Alphabet pledged to spend $5 billion on Waymo over multiple years.
Waymo has the support of Alphabet's new Chief Financial Officer, Anat Ashkenazi. From a financial reporting view, Waymo is part of Alphabet's "Other Bets" businesses. They include life sciences company Verily and Google's fiber broadband business.
"Waymo is one of the areas where we need to invest," Ashkenazi said at a recent financial conference. "We have a tremendous opportunity there. Phenomenal autonomous vehicles that can be used in a variety of ways. So scaling that up rapidly, getting to more markets, getting more vehicles is critical."
Google Stock Retreats In 2025
Google stock has retreated 18% this year. In addition to new internet search competition, concern over Department of Justice antitrust lawsuits has pressured Alphabet's shares.
Alphabet recently has stepped up media efforts to tout Waymo's progress. That has led some observers to speculate that a spinoff could be part of the long-term plan.
Deepwater Asset Management managing partner Gene Munster said in a November 2024 report: "I believe Alphabet will spin out Waymo in the next two to four years, with a potential valuation of $350 billion to $850 billion by 2030, which could add between 12% to 28% to Google's current market cap, depending on Alphabet's ownership percentage."
He added: "Currently, Uber holds about 70% of the U.S. (ride-sharing) market, followed by Lyft at 30%. Six years from now, I believe Uber and Lyft will be much smaller businesses, given their current approach to autonomy relies on third parties. I expect the future market will largely be split between Waymo and Tesla, with the first to achieve autonomy at scale capturing the majority share."
He estimated that it costs Waymo $200,000 to build each autonomous vehicle. Some estimates run lower. Costs include onboard computers, cameras, radar and laser sensors and the vehicle itself. Waymo uses Lidar sensors, unlike Tesla, adding to its costs.
When reporting first-quarter earnings, Tesla said its "pilot" robotaxi launch in Austin, Texas, is on track for June.
Waymo Revenue, Profitability
Waymo's profitability would be a factor in the timing of a possible spinoff, Munster said. At LightShed Ventures, general partner Walt Piecyk has a similar view.
"There is no pressure to spin out Waymo, so it's unlikely to happen until they generate positive EBITDA (earnings before interest, taxes, depreciation and amortization) and provide a believable path to positive free cash flow. That could take a few years given the current cost of the vehicle," Piecyk said.
He added that "two factors could accelerate the spinoff decision. First, competition is catching up. Tesla and a wave of autonomous upstarts are beginning to expose the bureaucratic drag slowing Waymo down. Although counterintuitive, given the capital intensity of early-stage autonomy, a leaner and independent Waymo might be better suited to fend off the fast-approaching competition.
"Second, investors may soon grow restless if Google's cash-printing and market dominant search engine starts to feel the impact of AI. If that happens, the pressure for real structural change could come fast."
Waymo Market Expansion
What's clear is that Waymo is scaling up fast as it improves safety and other features. But it faces growing competition from Tesla, Amazon.com's Zoox, Nuro and others.
In 2024, Waymo served over 4 million fully autonomous rides, providing 150,000 trips a week across Los Angeles, San Francisco and Phoenix. The company announced plans to expand to Austin and Atlanta this year and Miami in 2026. Robotaxi services in Austin started in early 2025.
Also in early 2025, Waymo said it would test its self-driving taxis in more than 10 new cities across the U.S., including Las Vegas and San Diego.
In addition, Waymo has been granted permission to map roadways near San Francisco Airport, opening up a potentially big market vs. Uber and Lyft in other cities as well.
Meanwhile, Waymo has mainly operated in sunny cities with favorable weather conditions. At the recent Ride AI autonomous-vehicle conference, Waymo said it expects to launch in new bad-weather markets as well.
For example, Waymo also said it's preparing its ride-hailing service for launch in Washington, D.C., in late 2026. And Waymo has revealed plans to expand in its first international market, Tokyo.
Uber, Lyft Partnerships: A Wild Card
Morgan Stanley's Nowak estimates that Waymo could garner over $2.5 billion in annual revenue by 2030. Waymo has stated it could explore licensing its technology directly to automakers, one potential source of revenue. Waymo recently said it has "no plans" to put advertising displays inside autonomous vehicles.
Waymo's expansion has been an overhang on Uber and Lyft as investors mull the impact of self-driving cars on the ride-hailing market. One possibility is that Waymo could strike a deeper partnership with either Uber or Lyft.
As it stands, Waymo and Uber have partnered in some markets. In those cases, Waymo's robotaxis are available through the Uber app.
One recent study said 20% of Uber rides in Austin were Waymo vehicles. However, in Miami the robotaxi service will be available only through the Waymo One app.
Meanwhile, Uber on its fourth-quarter earnings call cautioned investors that it plans to leverage its strong balance sheet to increase AV investments, which could include building up its own supply of robotaxis through partnerships.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
