What Sundar Pichai's $692 Million Pay Package Says About Alphabet's Next Chapter
Key Points
Up to $130 million of Pichai's pay package over the next several years is tied to Waymo.
Waymo recently completed a $16 billion investment round and is expanding into new cities this year.
The autonomous vehicle market could be worth more than $2 trillion by 2030.
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Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) recently disclosed CEO Sundar Pichai's pay package, offering some interesting insights into the direction the company is headed. Pichai receives a base salary of $2 million as CEO, but if certain goals are met, his pay over the next few years could jump to $692 million.
And one of the most intriguing goals, potentially contributing up to $130 million of his pay, is tied directly to the growth of Alphabet's robotaxi business, Waymo.
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Image source: Waymo.
Waymo is driving a large portion of Pichai's pay
Alphabet laid out some of the details of Pichai's pay in a recent SEC filing, saying that if Waymo's per-unit value over three years increases, then he may be eligible for the equity award. That essentially means the company's board will track Waymo's value over the next few years, and Pichai's pay could increase significantly based on the company's growth.
What the filing doesn't tell us is how Alphabet's board will measure this. For example, it doesn't say anything about the number of rides customers take or Waymo's revenue goals.
But with such a potentially large amount of Pichai's salary tied to Waymo, it's an indication that Alphabet is getting even more serious about the growth of its self-driving car over the next few years.
Accelerating into a $2 trillion market
Waymo recently closed a new $16 billion funding round, which raised the company's valuation to a stunning $116 billion. And with such massive potential for self-driving cars over the coming years, it's not surprising to see Alphabet tying a large chunk of its CEO's pay to its success.
Some estimates put the size of the autonomous vehicle market at $2.2 trillion by 2030. That's a massive market, and it's why companies including Uber, Tesla, Amazon, and Lucid are trying to take a slice of it.
But Waymo has a key advantage over all of them because the company has been working on autonomous vehicles for more than 17 years and has more than 200 million miles of autonomous real-world driving experience.
Scaling driverless cars is critical to making Waymo a viable, profitable business over the long term. Waymo's making progress toward this, with the company already operating in 10 U.S. cities and adding more this year, including its first international expansion when it heads to London. The company crossed over 450,000 paid weekly rides at the end of last year.
Revenue from the businesses is still just a fraction of Alphabet's total sales, with Waymo generating an estimated $315 million in annual recurring revenue. But the new expansion this year could push that higher.
Alphabet shareholders should keep a close eye on how successful Waymo is in rolling out its service in new cities this year. With the company's robotaxi lead, its new influx of capital, and a large portion of Pichai's pay tied to Waymo's growth, Alphabet is clearly focused on winning the robotaxi race.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.
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