Google and Amazon’s Biggest Profit Driver Last Quarter Was Their Anthropic Stakes—Which They Haven’t Sold

Why It Matters

The accounting of private‑AI stakes lets Big Tech amplify reported earnings without cash flow, creating volatility that can mislead investors and attract regulatory scrutiny. It underscores how AI partnerships are reshaping profit narratives beyond core product lines.

Key Takeaways

• Alphabet’s profit rose 81% to $62.6 B, driven by Anthropic stake
• Amazon’s net income up 77% to $30.3 B, half from Anthropic gains
• Both firms booked $28.7 B and $16.8 B unrealized gains on Anthropic
• Anthropic valuation surged, making Amazon’s $8 B stake worth >$70 B
• Accounting rules let AI investments inflate quarterly earnings volatility

Pulse Analysis

The first quarter of 2026 saw the biggest AI‑related capital outlay in corporate history, with Alphabet and Amazon together spending over $130 billion on capex and pledging nearly $700 billion for the year. While the headline numbers look impressive, a deeper dive reveals that the bulk of their profit spikes stem from mark‑to‑market adjustments on private‑AI equity, chiefly Anthropic. Alphabet’s 14% stake and Amazon’s $8 billion investment have been re‑valued at $28.7 billion and $70 billion respectively, turning balance‑sheet holdings into headline‑grabbing earnings.

This accounting approach, mandated by the Financial Accounting Standards Board since 2018, treats each new funding round as a trigger to adjust the fair value of private‑company stakes. The result is earnings that can swing dramatically on valuation changes that have no immediate cash impact. Investors now face earnings volatility that reflects investor sentiment in a niche AI market rather than operational performance. Analysts are warning that such volatility could obscure the true health of the underlying businesses and complicate valuation models.

Looking ahead, the practice is likely to attract heightened regulatory attention as policymakers question whether marking private‑AI assets to market creates an earnings bubble. Both firms have signaled continued commitment to Anthropic, suggesting future valuation lifts could further inflate quarterly profits. For competitors and startups, the precedent underscores the strategic value of securing big‑tech equity partners, while also highlighting the need for transparent reporting to maintain investor confidence in an increasingly AI‑driven economy.