DeepMind becomes profitable by leveraging ties to Google

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The company may be making most of its revenue by working for Alphabet.

DeepMind, the U.K.-based AI lab, has issued its latest financial report showing that the company has become profitable for the first time.

DeepMind, which seeks to develop artificial general intelligence, or “AGI”, was acquired by Google (now Alphabet Inc.) in 2014. The company’s website says that it “joined forces with Google in 2014 to accelerate our work, while continuing to set our own research agenda.”

Many believe, however, that DeepMind’s financial success may be due less to their own research agenda than trhe fact that they are working closely with their parent company.

The financial report does not provide much detail about DeepMind’s sources. “The Company generates revenue through a service agreement with another group undertaking for the provision of Research and Development services,” it reads.

DeepMind’s “many collaborations” with Alphabet

DeepMind does not directly sell products or services to consumers and companies. Its customers are Alphabet and its subsidiaries. It is not clear which one of DeepMind’s ventures caused the spike in its revenue.

DeepMind’s main area of focus is deep reinforcement learning (RL). This is a branch of machine learning that is very useful in scientific research. Alphabet has adapted DeepMind’s RL technology in some of its operations. For example, they use RL to reduce power consumption at Google data centers. They also use RL in developing the the technology of Waymo, their self-driving company.

But deep reinforcement learning research is also very expensive and it has limited commercial applications. Other deep learning systems, such as image classifiers and speech recognition systems, can be directly ported and integrated into new applications. But deep reinforcement learning models require training in the environment where they work.This imposes technical and financial costs that many organizations can’t afford. In other words, it would take the deep pockets of Google/Alphabet to fund this kind of work.

A separate division of DeepMind is works in applied AI projects for Google and Alphabet. However, that effort does not relate directly to the AGI research of the main DeepMind lab.

A DeepMind spokesperson told CNBC the company is “powering products and infrastructure that enrich the lives of billions through the many collaborations we have worked on across Alphabet over the years.”