Alphabet's autonomous taxi business, Waymo, is expanding rapidly and could become a meaningful financial contributor to the company by 2027, according to CEO Sundar Pichai's internal update delivered late last year. The company has since launched service in Sacramento, Chicago, and Dallas, expanded to multiple other cities, and is providing over 500,000 rides each week as of midyear. The question now is whether this growth trajectory is already reflected in Alphabet's stock price, or if investors are underestimating Waymo's near-term potential.

What Makes Waymo's Growth Trajectory Different From Other Robotaxi Efforts?

Waymo's operational scale sets it apart from competitors. The company has nearly 1,000 vehicles registered and has demonstrated that both the technology works and consumers are willing to use it at meaningful volumes. This contrasts sharply with Tesla's Cybercab launch, which left deployment questions unanswered and regulatory hurdles unresolved. Tesla had registered only 45 Cybercabs in Texas as of Wednesday, with its Texas robotaxi fleet totaling about 420 vehicles, mostly Model Ys.

The regulatory environment also favors Waymo's established approach. While Tesla's Cybercab faces scrutiny from the National Highway Traffic Safety Administration (NHTSA) over its lack of steering wheels, pedals, and mirrors, Waymo has already navigated these approval processes across multiple jurisdictions. This regulatory clarity reduces uncertainty around Waymo's ability to scale.

How Big Could Waymo Actually Become?

The addressable market is substantial. Goldman Sachs expects the U.S. robotaxi market to be worth $19 billion by 2030, growing to $48 billion by 2035, with the worldwide autonomous taxi industry potentially reaching more than $400 billion by 2035. Even if Waymo captures only a fraction of this market, the revenue opportunity is enormous compared to its current contribution to Alphabet's financials.

Currently, Waymo's results are not broken out separately in Alphabet's quarterly reports. Instead, they are lumped into the company's "other bets" arm, which contributed just $382 million in revenue during the three-month period ending in June. However, in an earlier fundraising presentation, Alphabet indicated that Waymo is worth $126 billion. While much of this valuation reflects future potential rather than current revenue, it demonstrates that the company itself views Waymo as a significant long-term asset.

Steps to Understanding Waymo's Financial Impact on Alphabet

• Track Weekly Ride Volume: Monitor Waymo's publicly disclosed ride numbers, which currently exceed 500,000 per week. This metric directly indicates consumer adoption and operational capacity, making it a leading indicator of future revenue growth.
• Watch for Separate Financial Reporting: If Alphabet begins breaking out Waymo's revenue in quarterly earnings reports, it signals management confidence that the business has reached a meaningful scale. This would also provide investors with clearer visibility into profitability timelines.
• Observe Geographic Expansion: Pay attention to which new cities Waymo enters and how quickly it scales within existing markets. Faster expansion suggests the company has solved operational and regulatory challenges, reducing execution risk.
• Monitor Regulatory Approvals: Track any new permits or exemptions Waymo receives from federal and state regulators. These approvals remove barriers to scaling and validate the company's technology approach.

For perspective on scale, Google's search business alone generated over $63 billion in revenue in the second quarter, while cloud computing added nearly $25 billion to the top line. Even if Waymo becomes a multi-billion-dollar business, it will take years to match these core revenue streams. However, the growth trajectory and market opportunity suggest Waymo could eventually become one of Alphabet's largest business units.

Is Alphabet Stock Undervalued Because of Waymo?

The answer is nuanced. While Waymo's $126 billion valuation may seem reasonable given the long-term market opportunity, it's unclear whether Pichai's prediction of "meaningful" contribution by 2027 or 2028 will materially move the needle on Alphabet's overall financial results in the near term. The term "meaningful" is subjective, and even significant Waymo revenue would be dwarfed by Alphabet's existing search and cloud businesses.

That said, analysts remain bullish on Alphabet overall. The vast majority of analysts currently rate Alphabet stock a strong buy, with a consensus price target of $426.68, which is 26 percent above the stock's current price. This suggests the market sees value in Alphabet independent of Waymo's near-term contribution, though the robotaxi business could serve as an upside surprise if it scales faster than expected.

The key takeaway is that Waymo represents a genuine growth opportunity for Alphabet, but investors should not expect it to meaningfully impact earnings until at least 2027 or 2028. In the meantime, the company's core search and cloud businesses continue to generate substantial cash flow, providing a stable foundation while Waymo scales toward profitability.