Lucky Break

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What's going on?

Google-parent company Alphabet pressed all investors’ right buttons late on Tuesday: the tech giant posted better-than-expected earnings, and its stock initially jumped 6%.

What does this mean?

The pandemic’s been forcing us to spend more and more of our time and money online, and advertisers have followed suit: they’ve been spending big on ads across Google and YouTube, which make up the majority of Alphabet’s income. Add to that the jump in demand for its cloud business thanks to the surge in home-working, and it’s easy to see why its revenue topped analysts’ forecasts. The company managed to keep its costs in check too, pushing its profit above expectations.

Why should I care?

Zooming in: Cloud’s got some way to go. 

Ads are Alphabet’s biggest revenue stream, sure, but investors are paying just as close attention to its fast-growing cloud business. Alphabet’s been investing in the segment for years in hopes of getting a slice of the $1 trillion industry, but the company hadn’t told investors how profitable it was until now. Or rather, how unprofitable it was: the segment posted a loss of over $1 billion last quarter, suggesting Alphabet has some way to go to catch up with front-runners Amazon and Microsoft…

Bigger picture: The regulatory walls are closing in.

To top it all, Australia just proposed a law that would force Big Tech to pay media outlets to show their content in their search feeds. And while Google only made around 2% of its revenue from the country in 2019 – low enough that it’s threatened to ditch Oz altogether – this is becoming a worrying pattern: the tech giant’s already paying for search feed content in France. Still, if Google thinks that’s bad, it ought to spare a thought for all the Aussies out there who might now have to go back to using Bing…

Originally posted as part of the Finimize daily email.

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