The Big Threat Hanging Over Google

If you’re lying awake at 3 a.m. one night, try reading the Justice Department’s 509-page “proposed finding of fact” in its antitrust lawsuit against Google’s search business, a revised version of which was filed with the court on Tuesday. You likely won’t make it past the extensive table of contents before you fall asleep. Even so, getting through the document is probably worth it, at least for investors in Google’s parent company, Alphabet. For those people, understanding the government’s case is essential. A government victory could impose restraints on Google’s search business, its cash cow. And depending on what those constraints are, they could hurt Google’s earnings power enough to affect its ability to keep up in artificial intelligence.

We’re a long way from there, for sure, but a final decision on the case is getting closer. Today the judge overseeing the case heard closing arguments from both sides. Perhaps not coincidentally, Google stock was conspicuously flat even as the rest of the stock market rallied. Investors are surely conscious of the threat posed by the search case (which is separate from the antitrust lawsuit over Google’s ad tech business). And the earnings updates from major tech companies in the past two weeks help put things into perspective. As much as we associate Apple with minting money, it actually generated less cash than either Microsoft or Alphabet in the March quarter. In fact, according to analysts surveyed by S&P Global Market Intelligence, Alphabet this year will generate more cash from operations—$131 billion—than either Apple or Microsoft.