Not So Fast, Food 🍕

Hey Superheroes,

Earnings season is testing nerves on both sides of the Pacific.

In the U.S., the Federal Reserve held rates steady at 3.5–3.75% on Wednesday in what was likely Jerome Powell’s final meeting as Chair. The decision split the committee 8–4, the biggest dissent since 1992, as policymakers struggled with inflation that’s been above target for five years and a U.S. labour market that’s softer but not breaking. Kevin Warsh is on track to take over from June.

Back home, the picture got harder. Australian CPI jumped to 4.6% in the 12 months to March, up sharply from 3.7% in February — the highest reading since September 2023. Transport surged 8.9% on the back of the Iran-driven fuel spike, housing rose 6.5%, and food climbed 3.1%. Markets are now pricing in roughly a 76% chance of an RBA rate hike to 4.35% next Tuesday.

The cost of living crisis is also showing up in places you might not expect — your local pizza shop. Here’s what moved this week.

Not So Fast, Food: Fast Food Stocks Get Burned

Australia’s biggest fast food names had a rough week, and the takeaway (sorry) is that even comfort food isn’t immune to a cost-of-living crunch.

🍕 Domino’s gets a slap

Domino’s Pizza Enterprises (ASX:DMP) crashed more than 12% on Tuesday to $15.57, after a soft Q1 result from the U.S. parent Domino’s Pizza Inc (NASDAQ:DPZ) sent shockwaves through global franchisees.

U.S. CEO Russell Weiner explicitly called out the Asia-Pacific region as the drag on results, noting earnings would have hit forecasts if you stripped out the Australian arm. That’s not a great look for a company already under pressure — DMP shares are now down nearly 38% over the past 12 months.

🍗 KFC, doughnuts, the lot

It wasn’t just Domino’s. KFC operator Collins Foods (ASX:CKF), Krispy Kreme’s ASX-listed parent and other quick-service restaurant names all came under pressure as analysts warned that persistent inflation and high rates are eroding household discretionary spending.

The thesis is simple. When budgets tighten, “affordable luxuries” like takeaway pizza and fried chicken are some of the first things to get cut. Volumes drop, fixed costs stay put, and margins get squeezed.

📉 The bigger picture

This is exactly the dynamic the RBA is watching. With CPI back at 4.6% and core inflation stuck at 3.3%, the cost-of-living squeeze is showing up directly in QSR sales numbers. The next test comes when DMP and CKF report their full-year results between July and August.

Google Goes Bigger

If fast food is feeling the pinch, AI hyperscalers are doing the opposite. Alphabet (NASDAQ:GOOGL) crushed Q1 expectations on Wednesday, with shares jumping around 6% in pre-market trade.

📊 The numbers

Revenue came in at $109.9 billion, up 22% year-on-year and well ahead of the $107 billion consensus. Earnings per share hit $5.11, almost double the $2.62 analysts were expecting. Net income surged 81% to $62.6 billion.

The standout was Google Cloud, which topped $20 billion in quarterly revenue, up 63% year-on-year — faster growth than Amazon’s AWS or Microsoft’s Azure on a like-for-like basis. Cloud backlog nearly doubled in the quarter to over $460 billion.

💸 The capex story

Alphabet upped its 2026 capex guidance to $180–$190 billion, from a previous range of $175–$185 billion. CFO Anat Ashkenazi also flagged that 2027 capex would “significantly increase” from there.

CEO Sundar Pichai told analysts the company is “compute constrained in the near term.” In other words: they may have difficulties in building data centres fast enough to meet AI demand.

🤖 Why it matters

This is the third earnings cycle in a row where the AI capex numbers have gone up rather than down. For Australian investors holding Alphabet through ETFs or super funds, the trade-off is the same as ever — eye-watering spending now in exchange for the bet that AI infrastructure is the next decade’s defining moat.

🔦 Some other things we’re shining the Spotlight on:

ATLASSIAN SOARS ON CLOUD ACCELERATION: Atlassian (NASDAQ:TEAM) posted Q3 revenue of $1.8 billion, up 32% year-on-year, with cloud revenue surpassing $1.1 billion and growing 29%. Co-founder Mike Cannon-Brookes called it the company’s “largest-ever quarter for competitive displacements” as enterprises switch from legacy ITSM rivals.

ANZ MAKING BANK: ANZ (ASX:ANZ) posted half-year cash profit of $3.78 billion, up 70% on the prior half (up 14% excluding one-offs). The bank also took a $175 million provision for potential impacts of the Middle East conflict — the first major Australian bank to flag oil-shock risk in its books.

BYE BYE BYE — UAE QUITS OPEC: In a major shake-up, the United Arab Emirates announced it will withdraw from OPEC and OPEC+ effective today, the first major exit from the cartel in years. The UAE is OPEC’s second-largest producer, accounting for roughly 17% of the group’s oil sales, and analysts say the move could weaken OPEC’s ability to control global supply long-term.

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