Google Pixel could generate over $5.8 billion in revenues for Google

Morgan Stanley, a financial firm, published a new report estimating that Google’s new premium smartphone, the Pixel (and Pixel XL), will sell 3 million units in the final three months of 2016, generating an estimated $2 billion in revenue for the company. The firm also forecast that the Pixel will sell between 5 million and 6 million units in 2017, generating an additional $3.8 billion in revenue for Google. The estimate is based on the expectation that Google Pixel will retail between $649 and $869 next year. 

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An interesting note in the report is that the Pixel is half as profitable for Google as the iPhone is for Apple, thanks to the higher cost of materials in the Google Pixel. Its gross profit margin is only estimated to be between 22-25% according to this report. That’s quite a bit less than Apple’s own profit margin for its iPhone 7, which is around 41%.

A previous report had suggested that the Google Pixel was indeed about as profitable as the iPhone, but that doesn’t seem to be the case at least according to the new report.

Apple sold 212 million iPhones in the 2016 financial year, generating the company $13.7 billion in revenue. In the last quarter of 2016, Apple sold 45.5 million iPhones, generating $28.2 billion in revenue. People also spend three times more money on iOS shopping apps than they do on Android devices, but the report is banking on Pixel-exclusive features to help narrow that gap.

The Pixel’s user base will likely be more profitable per capita than equivalent user bases of lower-end Android smartphones, Morgan Stanley says. The firm estimates Pixel users will buy more apps, spend more inside apps and could potentially be more valuable as a mobile advertising target market. That has a double benefit for Google, as the report says that advertisers are expected to spend more to reach those who spend heavily on their mobile phones, so Google’s incentive for getting more people into its Pixel ecosystem is two-fold.

The Pixel is this season’s most anticipated premium Android smartphone, after Samsung was forced to effectively sit out the 2016 holiday season following its total recall of the Galaxy Note 7. Google hopes the Pixel will entice some iPhone users to return to Android, or, in other cases, try out Android for the first time.

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