Alpha Does Better

Good Alphabet results

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What's going on?

Google parent Alphabet reported better-than-predicted second-quarter results on Thursday, helping its stock initially rise 9%. Thats one way to hit the top of investors search results.

What does this mean?

Googles ad revenue growth slowed much faster in the first quarter than investors were expecting, partly as a result of tweaks to YouTubes algorithm. But despite further tinkering at YouTube, last quarters ad revenue still the lions share of Alphabets total came good, exceeding forecasts. And Alphabets costs, which include paying the likes of Apple to dish out its ads on mobile, didnt rise as much as investors expected either, helping it beat profit estimates.

Why should I care?

For markets: You get a fine! You get a fine! You get a fine!


On Monday, Google reportedly agreed to pay a multimillion-dollar fine for unlawfully collecting American kids data on YouTube to the very same regulator that dinged Facebook two days later. Such fines now appear to be par for the course for major US tech companies, but investors dont seem too bothered: they continued to buy up Facebooks shares before and after it reported better-than-expected results this week, and did the same with Alphabets on Thursday. Those investors might have breathed a sigh of relief that the advertising machine was back up and running and that extra profit-boosting share buybacks were afoot.



Zooming out: Some clouds dont have silver linings.


The UKs biggest public tech company, Sage used by over half of all British businesses to pay their workers reported weaker-than-expected earnings on Thursday (its stock fell 10%). Its struggling to adjust to the new normal across cloud-based software services: sacrificing one-off payments in favor of recurring income from subscriptions. Sage may be big news in Britain and the cloud industry at large may currently be enjoying high growth but its struggling to make headway when up against international powerhouses like Google, Microsoft, and Amazon.

Originally posted as part of the Finimize daily email.

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