Alpha Beta

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What's going on?

On Thursday, Alphabet Googles parent company reported third-quarter results that were more A+ than zzz… but its stock fell by 3%.

What does this mean?

Investors are used to Alphabet exceeding expectations: this time around, profit was 25% higher than predicted, while sales were marginally below forecasts.


Google still accounts for the lions share of Alphabets earnings. The search engine gets paid every time people see the ads it hosts, but it has to share that revenue with the likes of Apple if the ad is viewed a Safari web browser, for example. The share of Google sales paid out to third parties failed to fall last quarter likely a disappointment to investors whore also seeing Alphabet spend more on data centers (for cloud computing services) and YouTube content, particularly music.

Why should I care?

For markets: No rest for the wicked.

When markets wobble, tech stocks tend to fall first and fastest as seen recently. Investors get colder on techs promise of high sales growth and profit to come, instead favoring shares in more predictable companies, whose prices, relative to expected profits, are often cheaper. Stubbornly high costs may have encouraged investors to sell off Alphabets shares, in contrast to Twitters: its stock rose 17% on Thursday, partly thanks to a better-than-expected third quarter where ad sales rose even as active users on the platform fell.



The bigger picture: Crowded advertising space.

A rising number of shoppers starting their search on Amazon rather than Google (as they mightve done previously) has some investors worried that the big As encroaching on the other big As advertising business. Still, its got a way to go: Amazons ad space generates some $8 billion of annual revenue; with Google, thats over $100 billion. But adversity breeds invention: while Google appeals a European fine related to pre-loading its own apps on Android phones, its also busy planning to charge phone makers license fees for its apps instead, potentially unboxing a new source of revenue.

Originally posted as part of the Finimize daily email.

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