• Waymo is expanding its autonomous ride-hailing service to new cities like Atlanta and Miami.
• A Waymo IPO would likely attract investors, but there’s no clear indication one will happen in the near future.
• Investors can gain exposure to Waymo’s growth by purchasing stock in its Alphabet, its parent company.

Waymo is more than just a leader in autonomous ride hailing—it’s a disruptive force shaping the future of transportation. And its potential IPO has sparked interest among investors eager to capitalize on innovation. Meanwhile, as a subsidiary of Alphabet (GOOG), Waymo is enhancing its parent company’s market outlook and potential for growth. 

For investors looking to tap into Waymo’s promising future, investing in Alphabet stock offers an opportunity—providing indirect exposure to Waymo’s upside while also benefiting from Alphabet’s diversified portfolio and strong market positioning. Let’s dive into Waymo’s business model, explore its IPO prospects and examine the factors investors should monitor as the company charts its next phase.

A leader in autonomous driving

Waymo continues to make impressive strides in its mission to bring fully autonomous driving to the masses. While attention is focused on the general progress of the self-driving industry, Waymo’s achievements autonomous ride-hailing often fall under the radar. Unlike the Tesla (TSLA) approach, which relies on cameras and AI, Waymo has built a system that incorporates lidar, radar and a suite of other sensors to understand the vehicle’s surroundings. This technology, combined with detailed maps of the cities where Waymo operates, provides its autonomous vehicles with an edge in navigating complex urban streets and high-traffic areas.

Waymo’s already making progress in several cities, including Phoenix, San Francisco and Los Angeles, where the company operates its Waymo One service. In those areas, passengers can book a ride through the Waymo One app, enjoying a smooth and reliable experience in a fully autonomous vehicle. As of October, the company was expanding into Atlanta, Miami and Tokyo, demonstrating its intention of adopting its technology to a range of urban settings, each with its own driving conditions.

But the expansion is only one element of Waymo’s strategy. The company is also pushing its platform to handle increasingly complex scenarios, such as those encountered in inclement weather. By testing and deploying its service in new regions and in varying driving conditions, Waymo gains insight that helps refine its technology, making it more adaptable and resilient. Most rides are in Jaguar I-Pace vehicles, but Waymo plans to diversify its fleet with vehicles like the Hyundai Ioniq 5. With more types of vehicles, it can meet the needs of different regions and cater to a variety of customer preferences. That should improve the customer experience and enhance the brand’s appeal. 

But safety and the reliability remain cornerstones of the company’s strategy and offer competitive advantages. Its vehicles have outperformed human drivers in avoiding crashes, which will help earn the public’s trust. While the company has encountered setbacks, including collisions, it has responded by refining its software and bolstering its safety systems. As Waymo continues to perfect its technology and expand its reach, it will strengthen its position as an industry leader, making it an increasingly attractive option for investors.

A sector shakeup

Waymo wants to become a dominant player in autonomous ride-hailing, but its partnership with Uber Technologies (UBER) adds another layer of complexity to its strategy. While the collaboration has been beneficial in the short term, it introduces potential challenges, particularly the competitive implications it could have as both companies seek to solidify their positions in the market.

Uber has found itself in a complex position as Waymo’s robotaxi service expands. In cities like Phoenix, users of the Uber platform can hail a Waymo vehicle through the Uber app, providing riders with a seamless experience and more options. This partnership—recently extended to include Atlanta and Austin, Texas—proves strategic for Uber, enabling the company to leverage autonomous vehicle technology without bearing the costs of developing its own driverless fleet. However, Uber’s increasing reliance on Waymo—and other autonomous vehicle companies like WeRide (WRD)—introduces potential risks, as well. 

For Waymo, the partnership with Uber is a valuable way to scale its operations while capping the operational costs of building and maintaining a ride-hailing service. In cities like Austin and Atlanta, Uber will shoulder responsibilities like cleaning and charging vehicle, freeing Waymo to focus on testing and refining its autonomous technology. In return, Waymo provides Uber with access to a fleet of self-driving vehicles, which could help Uber lower costs over time because labor is one of its largest expenses. The partnership is mutually beneficial, but as Waymo’s service becomes more mainstream, Uber’s role could shift, particularly in markets where autonomous rides are increasingly popular.

The partnership leaves open questions about future competition. In San Francisco, where Waymo operates without an Uber partnership, the company has already captured 22% of the market—on par with Lyft (LYFT). That milestone was achieved last November, only 15 months after Waymo’s San Francisco launch in August 2023. That suggests Waymo could eventually carve out a strong position in other markets, especially as its fleet grows and its technology improves.

For investors, understanding the dynamics of the ride-hailing market is essential when evaluating the long-term prospects of companies in this rapidly evolving sector. Waymo’s expansion plans offer a glimpse of the future of autonomous transportation, while raising questions about the impact of its market-leading technology. As the company progresses, closely monitoring its partnerships will be crucial, particularly in light of a potential initial public offering (IPO). Over time, partnerships that were once strategic for Waymo’s growth could turn into obstacles as it aims to assert greater independence and scale.

Not going public in 2025

Despite Waymo’s impressive growth and market potential, the company’s path to an initial pubic offering remains unclear. Since its founding in 2009, Waymo has raised over $11 billion in capital and has made groundbreaking advances in autonomous driving. And with a valuation of at least $45 billion, the company’s technology and market position suggest it could become an attractive investment opportunity should it decide to go public. Still, several factors make predicting the timing of an IPO challenging.

As a subsidiary of Alphabet, Waymo has been somewhat insulated from the intense scrutiny startips typically face by in the autonomous vehicle sector. Plus, Waymo can leverage Alphabet’s vast resources, thus reducing the pressures that often accompany independent ventures. This strategic advantage gives Waymo the flexibility to focus on refining its technology, strengthening its market position and ensuring long-term profitability—goals that could position the company for even greater success when it eventually decides to enter the public markets.

The growing interest from companies like WeRide and Pony.ai (PONY) in pursuing public listings adds another layer of complexity to Waymo’s potential IPO. The success of these IPOs, combined with market conditions and evolving regulatory frameworks, could provide insight into the timing and viability of a Waymo listing. So, investors looking to gain exposure to Waymo should monitor developments in this niche, as well as regulatory changes, because these factors could not only influence the timing of an IPO, but also affect Waymo’s longer-term prospects.

All in all, Waymo’s expansion and technological breakthroughs position it as a strong candidate for an IPO. As the company’s revenue continues to rise, the momentum for a public debut may intensify. Investors looking to get ahead should therefore remain vigilant, closely tracking the company’s public filings for any clues on the timing of an offering.

Investing in Waymo via Alphabet

As Waymo continues to make impressive strides, investors should also consider the broader implications of Waymo’s growth for its parent company, Alphabet. The latter stands to gain not only from Waymo’s success but also from the increased visibility and potential value that could accompany Waymo’s eventual IPO. A standalone Waymo could unlock substantial value for Alphabet shareholders, either by directly benefiting from Waymo’s expansion, or by allowing investors to realize its independent worth through the sale of shares.

From a valuation perspective, Alphabet is trading at a reasonable P/E ratio of 23, slightly above the sector median of 20. This suggests Alphabet shares are not overly inflated, especially in today’s market, where many tech stocks are trading at high multiples. Alphabet’s PEG ratio aligns with the sector median, indicating its prospects for growth are priced fairly relative to its potential for continued expansion. With 53 of 67 analysts rating Alphabet as a “buy” or “overweight,” and an average price target of $220 per share—above its current price of $185 per share—the stock appears to have solid upside potential, especially when factoring in the long-term value that could be realized from Waymo’s success.

Alphabet’s valuation, coupled with Waymo’s impressive growth trajectory, offers a compelling opportunity for investors seeking both stability and long-term potential. The company could benefit not only from its core businesses but also from the increasing value of emerging technologies, including Waymo’s autonomous vehicle system. As these innovations continue to mature, they could unlock substantial value for Alphabet shareholders—either through organic growth, or by realizing the standalone worth of Waymo through a potential spinoff or IPO.

Investment takeaways

Waymo’s emergence as a player in the autonomous driving sector offers considerable potential for Alphabet’s shareholders, driven both by the company’s growth and the possibility of a future IPO or spinoff. As Waymo accelerates its geographic expansion and continues to refine its technology, Alphabet stands to benefit not only from its core advertising and cloud businesses but also from the increasing value of Waymo’s self-driving technology, which could eventually stand as a valuable independent asset.

Alphabet’s current valuation, with a price-to-earnings (P/E) ratio of 23, remains relatively attractive compared to the broader tech market. Coupled with strong analyst support and a promising growth trajectory, the company looks well-positioned for both near-term gains and sustained success. While realizing its full potential may take time, its role in the rapidly evolving autonomous vehicle market enhances Alphabet’s investment appeal. Investors looking to gain exposure to the growing autonomous driving sector could find shares in Alphabet represent a compelling investment proposition. 

Andrew Prochnow has more than 15 years of experience trading the global financial markets, including 10 years as a professional options trader. Andrew is a frequent contributor Luckbox magazine.

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