Google CEO Sundar Pichai has repeatedly said the company’s future success will be based in artificial intelligence.
Google acquired the British artificial-intelligence startup DeepMind in 2014 for a reported £400 million (roughly $525 million), a company its cofounder Demis Hassabis once described as aiming at “solving intelligence, and then using that to solve everything else.” Since then, the company’s researchers have built a system that beat humans at one of the most complicated board games ever, and is now trying to beat humans at complex video games. It’s building AI that’s learning to navigate 3D spaces as we do, and is training other systems on British medical data, theoretically to spot illness more quickly. It’s also started to integrate with teams in the US to bring its work to Google products where they might be useful.
All of this research comes at a price. DeepMind lost £123.5 million (roughly $162 million) last year, according to information filed with the UK government Oct. 2. Under UK law, any private company (DeepMind is still registered as a private company in the UK) with over £10.2 million ($13.4 million) in annual revenue, assets worth over £5.1 million, and more than 50 employees is required to disclose their financials to the government.
The company generated £40.2 million ($52.7 million) in revenue last year, which was entirely from work it did for other sections of is parent company Alphabet, rather than external clients. DeepMind also had a £41.1 million “management service fee,” which includes costs such as real estate and the running and maintenance of its computer systems. But the biggest loss by far was the £104.7 million ($137 million) expense it incurred for “staff costs and other related costs,” which includes things like the company’s payroll, travel, office hardware, and software—and presumably, stock-based compensation. (That’s more than twice the £44.2 million it incurred in 2015.)
DeepMind’s legal fees also skyrocketed in 2016: It paid lawyers £658,144 last year, compared to £144,881 in 2015—most likely because of findings earlier this year that it illegally held UK nationals’ health information. It was not fined for its actions, however.
Google CEO Sundar Pichai has repeatedly said the company’s future success will be based in artificial intelligence. But it’s unclear how long investors will put up with the massive losses being racked up by Alphabet’s “Other Bets—the potentially world-changing research its non-Google companies are doing in health, robotics, connectivity, and artificial intelligence. In 2016, Other Bets lost $3.77 billion (whereas Alphabet as a whole earned $19 billion in the same year), so in the grand scheme of things, DeepMind’s losses were a small drop in a large ocean.
“We’re really proud that some of the world’s most exciting AI research and real-world application is taking place right here in London,” DeepMind told Quartz. “We intend to keep investing in our scientific mission, and to work with the world’s brightest minds to tackle society’s most complex problems.”