A little over a week ago, Alphabet Inc. (NASDAQ:GOOGL, NASDAQ:GOOG) posted a first-quarter report that was unlike any other it ever had.

How so? Its profit thus far on its stake in ride-hailing service Uber was finally detailed, for one. That wasn’t the most interesting new data nugget injected into the company’s income breakdown, however. Last quarter, the company’s smart-home project — called Nest — was moved from Alphabet’s “Other Bets” to subdivision Google’s “Other Revenue,” offering owners of GOOGL stock a little more fiscal insight than they’d had in the past about Nest. And, some careful extrapolating of the reconfigured numbers then and now implies that, for all of 2017, Nest turned $726 million worth of revenue into a loss of $621 million.

The question is does the plausible future for Nest justify its cost in the meantime?

Yep.

What’s Nest?

For current and would-be owners of GOOGL stock not familiar with it (and there are still plenty of these people out there — one of its key marketing challenges — Nest is a multi-pronged platform that can turn any house into a smart home.

It’s most often compared to the Echo, from Amazon.com, Inc. (NASDAQ:AMZN). While that’s not an entirely unmerited comparison, particularly now that Amazon is acquiring smart doorbell outfit Ring, it’s still not a true apples-to-apples comparison. Nest offers everything from smoke alarms to doorbells to thermostats to security cameras, integrating them all with an easy-to-use interface. It’s so much more than Amazon’s Alexa-powered Echo.

But still, a loss that’s almost the same amount as the revenue the division generated last year?

Fear not. There’s a big pot of gold waiting at the end of the rainbow.

Smart Homes Will Be Huge

Owners of Google stock worried that the company is only spinning its wheels by taking aim at a fruitless market need not worry. Though Alphabet isn’t making a killing on smart homes just yet, the opportunity is there.

The outlooks vary from one expert to the next, but they’re all big. Zion Market Research, for instance, believes the smart-home market will be worth $53 billion by 2020. ResearchAndMarkets.com’s outlook is a little more thrilling, calling for a market size of $107 billion by 2023. Even at the lower end of that range, however, the potential is impressive.

And Google’s Nest is well-positioned to secure a big stake of that market for itself. Though Amazon’s smart speaker still dominates that sliver of the smart-home market, eMarketer says Google’s share of that market is projected to keep growing through 2020 at the expense of Amazon’s Echo.

It matters, simply because Google’s smart-speaker and eventually its smart screen will ultimately serve as the hub that allows a smart home to be effectively managed.

Don’t read too much into the idea, or the numbers. While Nest arguably has the best tools in the business, Amazon is the marketing powerhouse in the arena, and the Ring brand now under its umbrella makes it all the more powerful. Even though the smart speaker from Apple Inc. (NASDAQ:AAPL) isn’t exactly a strong foray into the smart-home market, Apple is still a fierce competitor if for no other reason than its deep pockets and tenacity.

In other words, Google’s Nest isn’t going to outright dominate this still-growing market.

Bottom Line for GOOGL Stock

That’s not the point, though. Alphabet doesn’t need to win this whole market to do well with it. A little more (relatively) revenue growth may well translate into a swing to a profit for Nest.

More than that, however, Nest doesn’t necessarily have to turn a profit to be fruitful for Alphabet.

It’s an idea more relatable to Amazon than Alphabet — taking losses with certain business in order to gather customer data that ultimately makes other business lines even more profitable. In the case of Nest and related adoption of smart speakers and smart screens, the platform will be able to gather a massive amount of data regarding the habits of the people who live in that home, which ultimately boosts the company’s ad business.

However it all takes shape — and the future is still fuzzy to be sure — the losses being booked and the tepid revenue being taken in with Nest need not be alarming to Alphabet stock holders. This was always going to be an expensive project with a long runway.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.