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Alphabet's Waymo autonomous driving unit can be on a $1 billion revenue run rate before 2020 and hit $10 billion a bit after 2025, according to an Evercore ISI analysis.

Then after that initial surge the big bets on Waymo will be off, according to Evercore ISI analyst Anthony DiClemente.

What's interesting about DeClemente's analysis is that the assumption is that Waymo will become an Uber and Lyft killer instead of grabbing some technology portion of the $5 trillion auto transportation market. If anything, Waymo as taxi service may wind up funding more technology advances.

DiClemente said in a research note:

Backed by the financial and technical support of its parent company Alphabet, we believe Waymo, enjoys strategic advantages likely to prove critical in the scaled operation of autonomous ride services, including: 1) AI/computer vision; 2) hyper-scale cloud compute infrastructure; and 3) ubiquitous distribution of mapping services. With commercial service set to launch in Phoenix by year-end, and ~80k vehicles on order from OEMs, we contend that the Waymo narrative should soon shift from long-term opportunity to near-term execution.

What will Waymo do? Simply put, DiClemente argued that Waymo will undercut Uber and Lyft by about 25 percent. Waymo can be aggressive on pricing and grab share because it doesn't have to pay human drivers. Waymo will have about 56,000 vehicles in service in 2020, according to DiClemente.

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Waymo also has a city-by-city roadmap with service starting in Phoenix later this year. In addition, Waymo's autonomous miles traveled is growing 15 percent a month. That experience makes the overall Waymo fleet smarter. The DiClemente analysis assumes major cities in California, Florida and Texas allow for Waymo operation.

Here's a look at the Waymo potential economics:

DiClemente makes a compelling case for Waymo through the mid-2020s, but then the analyst noted that there are long-term wild cards. Cities and urban planning will be more clear and regulations can emerge. The other wild-card is that automakers that are behind Waymo will likely catch up. The other possibility is that Waymo ultimately licenses its technology as an ingredient brand. Such a move would mean fatter margins and would require less upfront capital spending.

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