Is voice recognition on Android Wear performed on the device? The recently announced smartwatches based on Android Wear extensively rely on voice recognition for user interaction.

Is the voice recognition performed on-device, on the paired smartphone, or in Google's cloud? Or is it a mix of those three, e.g. online with an offline fallback?
While I don't have any official source, from testing it's clear that it's cloud based.


Watch paired, handheld with internet connection -> Works.
Watch paired, handheld without internet connection (e.g. airplane mode) -> Doesn't work.
Watch not paired (e.g. handheld turned off) -> Doesn't work.