Act 01 · The filingThree records in nine days, one single trigger
Between July 22 and July 30, 2026, Alphabet, Microsoft and Amazon reported their quarterly results. All three posted records, together $210 billion in net income in a single quarter. Amazon's press release contains one sentence that almost nobody quoted.
The sentence. „Second quarter 2026 net income includes non-operating pre-tax other income of $53.4 billion, primarily from our investments in Anthropic.“[01]
In plain terms. Of $62.6 billion in reported profit, $53.4 billion is not revenue. No customer paid for it, not a cent changed hands.
The cross-check. Amazon's over the same trailing twelve months was minus $7.604 billion. A year earlier it was plus $18.184 billion[01].
„Record profit“ and „earned no money“ appeared in the same document.
Both are true. It is an accounting rule, not a contradiction.
What a paper gain is, in one picture
Imagine you bought a house three years ago. Yesterday your neighbour sold an identical one for twice the price. On paper yours is now worth twice as much. You have received nothing, you cannot spend it, and if the market turns, the gain is gone.
The only difference to Amazon: you do not have to report this as income on your tax return. A US corporation has to put it in its income statement. That is a .
The neighbour here is called . On May 28, 2026, $65 billion in fresh capital went into Anthropic at a valuation of $965 billion[05]. Amazon had paid $13 billion into the same company over three years[08] and now marks that stake up to the new price. The difference is the profit.
Who put up those $65 billion is the more interesting question. The answer is in Act 03.
All of this is legal, audited and standard. It only has two properties that the word „profit“ does not suggest: you cannot spend it, and it can reverse.
Act 02 · The ruleOwn more, book less
Microsoft is the control case: the company holds stakes in both large AI labs. In the same quarter in which Amazon books $53 billion, Microsoft's entire non-operating income line shows a plus of $3.444 billion[03]. A year earlier the same line showed minus $1.707 billion.
The 20 percent threshold
Under US accounting rules, the size of a stake decides what may enter the income statement at all. The line sits at around 20 percent of voting rights: above it, an investor is presumed to exercise significant influence[13].
Below the threshold, applies. Because a private company has no running market price, the so-called kicks in: the stake is carried at cost and only adjusted on an observable price event. A new funding round is exactly such an event. This is where Amazon's and Alphabet's Anthropic stakes sit.
Above the threshold, applies, the equity method. The investor then books not the value of the stake but its share of the investee's earnings. At an AI lab burning billions, that is more of a loss channel, and increases in value do not show up at all.
The larger the stake, the less of its appreciation may reach the profit line.
The same rule hands Amazon and Alphabet their record numbers: both deliberately keep Anthropic below the threshold. Amazon's stake runs through non-voting preferred stock, Alphabet's sits at around 14 percent.
All three paper gains have the same trigger: Anthropic's Series H on May 28, 2026 falls into the quarter of all three companies. A single price event at a firm none of them controls moves three income statements. Not one of them received a dollar for it.
Was it always like this? No, the rule only applies since 2018
Until the end of 2017, stakes without a market price fell under the cost method: the holding sat at cost and stayed there. Increases in value did not appear in the income statement, they only became profit when the stake was actually sold, that is, when money moved.
In January 2016 the US standard setter FASB changed this. ASU 2016-01 abolished the cost method, equity investments have since been carried at fair value, and changes in value run through the income statement. For calendar-year companies this applies from fiscal 2018 onwards. The measurement alternative comes out of the same change[14].
Had Anthropic closed the same round in 2017, Amazon's income statement would show a zero here.
That the change would make reported profits noisier was known at the time. EY wrote for clients in 2016 that the cost method was no longer available for equity securities without readily determinable fair values, and that it followed:
„The new guidance could significantly increase earnings volatility for some entities, especially those that hold significant investments in equity securities they classified as AFS before adopting ASU 2016-01.“EY, Technical Line on ASU 2016-01[14]
EY had listed holdings primarily in mind there, whose swings in value had until then bypassed net income and gone straight to equity. Today's record numbers come from the other branch of the same change, the holdings without a market price. The warning was still right on the point that matters here: reported profit has swung ever since for reasons that have nothing to do with the business.
The $53.4 billion is not a trick and not a grey area, it is the prescribed consequence of a rule that has only existed for eight reporting years. It becomes visible only now, because before there were no private companies whose valuation triples within twelve months while corporations sit on double-digit billion stakes in them.
The same event, three levels of openness
All three book from the same occasion, but they differ in how clearly they say where the profit came from.
| Company | Where the number sits | Is the stake named? |
|---|---|---|
| Amazon | Press release, third bullet, in plain words: „non-operating pre-tax other income of $53.4 billion“[01] | Yes, verbatim „primarily from our investments in Anthropic“ |
| Alphabet | Press release as an aggregate line „Gain on equity securities, net“ of $99.0bn, after-tax effect in a footnote[02] | No. The value of an unnamed holding sits in a separate filing, the attribution comes from Bloomberg[06] |
| Microsoft | Press release, in the section on discrete items: „These include a $3.2 billion gain from our investment in Anthropic“. The smaller OpenAI effect of $480m additionally sits in its own reconciliation table[03] | Yes, both holdings by name. Microsoft is the only one that even publishes a profit figure adjusted for the stake |
Act 03 · The curveA year ago it was two billion
The numbers in Act 01 are a still image. The movement says more: the same item, six quarters in a row, at the same two companies.
First, the number jumps rather than grows. Q2 and Q4 2025 sit at two to three and a half billion, Q1 and Q3 in between at twelve and twenty-one. That is not a business trajectory, it is a calendar: the entry only appears when a new funding round takes place. Earnings with this pattern cannot be extrapolated, which is what every forecast attempts.
Second, the order of magnitude is new. In the quarter ending June 30, 2025, after-tax paper gains made up around five percent of net income at Amazon and around four at Alphabet. A year later it is two thirds. Anyone treating that as the normal state is mistaking one year for a trend.
And where did the money come from that set the price?
Outsiders value Anthropic higher, three companies mark their stakes up alongside. That is incomplete: Anthropic broke down in the Series H announcement where the $65 billion came from.
Which means the house analogy from Act 01 no longer quite holds. The neighbour did not simply sell his house for more. Part of the purchase price came from you.
A good three quarters of the round is money from investors with no connection to Amazon, Google or Microsoft. The $965 billion price was not made by the hyperscalers. It did not come about without them either. What stands out is the ratio of money in to profit booked: Amazon has paid $13 billion into Anthropic and writes $53.4 billion in profit out of it in a single quarter. Four times everything ever transferred.
Act 04 · The consequencesWhy this is more than a footnote
One could object: fine, analysts strip this out anyway. That is the best counterargument, and Gil Luria of D.A. Davidson makes it[04]. Three points remain nonetheless.
First: the increase consists almost entirely of this one item
The percentage of profit is the milder view. Calculated against the increase, it looks different. The prior-year quarter also already carried paper gains. Stripping them only out of the current quarter compares an adjusted year with an unadjusted one and depresses the result. The calculation below therefore adjusts both periods.
| Metric, in $bn | Amazon | Alphabet | Microsoft |
|---|---|---|---|
| Net income, prior-year quarter | 18.2 | 28.2 | 27.2 |
| of which paper gain, after tax | 0.9 | 1.0 | −1.6 |
| adjusted, prior year | 17.3 | 27.2 | 28.8 |
| Net income Q2 2026 | 62.6 | 112.2 | 35.8 |
| of which paper gain, after tax | 41.6 | 77.1 | 3.1 |
| adjusted, now | 21.0 | 35.1 | 32.7 |
| Share of the increase | around 92 % | around 91 % | around 54 % |
| reported growth | +245 % | +298 % | +31 % |
| for reference: company's own adjustment | none | none | +22 % (OpenAI only) |
| Growth without paper gains | around +22 % | around +29 % | around +14 % |
Plus 22 and plus 29 percent are respectable numbers for companies of this size. They are simply something other than plus 245 and plus 298.
Microsoft shows that this runs in both directions. The company reports plus 31 percent and looks like the solid counterexample to the other two. In the prior-year quarter, though, its books carried a loss of $1.575 billion from the OpenAI stake[03], which pushed the comparison base down.
Microsoft voluntarily publishes figures adjusted for the OpenAI stake alongside the official ones and arrives at plus 22 rather than plus 31 percent[03]. That adjustment leaves the Anthropic gain in place, which was the larger of the two in the quarter. Strip that out as well and around 14 percent remains. The company with the smallest paper gain is therefore the only one of the three whose adjusted growth sits below its reported growth.
Second: it now distorts the entire index
Data provider ran the numbers for the quarter to see what happens when these items are removed. Earnings growth across the entire S&P 500 was around 48 percent. Without the equity gains at Alphabet and Amazon it would have been around 29[04].
Two positions in two balance sheets thus explain nearly two fifths of the earnings growth of the 500 largest listed US companies. Anyone paying into a broad index fund has this in their return, without a single additional dollar having been earned anywhere.
Third: it lands in a quarter in which money got tight
Paper gains would be a side note if the cash flow next to them held up. It does not. Amazon's capital expenditure over the last twelve months came to $169.0 billion against $161.4 billion in operating cash flow, or around 105 percent[01]. Among the large providers Amazon is the only one above one hundred, the others sit between 57 and 63 percent according to an independent analysis[10]. Long-term debt doubled within six months from $65.6 billion to $128.9 billion[01].
And Alphabet, a company with around $144 billion in net cash, issued shares in June 2026: $49.6 billion net, plus a programme for another $40 billion[02]. In the same quarter in which it reports $99 billion in paper gains, it raises fresh equity.
The profit sits in the income statement. The money came from the stock market.
ClosingWhat becomes of it
„Does the paper ever turn into money?“
The paper gains become real.
Anthropic confidentially filed for an IPO on June 1, 2026. If it prices at or above the Series H level, the entry turns into a market price at which shares can actually be sold. Amazon's $13 billion would then be worth real billions, and the accounting line would merely have been right earlier than the cash register. The tangible side supports this outcome: data centres are at capacity, AI chips have months of lead time, and the contracts behind it are signed.
The paper gains go up in smoke.
If the valuation falls at the next round or at the IPO, the same mechanism runs backwards. Same line, same rulebook, opposite sign, and without a single customer ordering less. The drop is known: $244 billion in paper gains from six quarters, none of which ever passed through a cash register and therefore cannot be defended by one either. Anyone who read the gains as earning power will read the loss as collapse. Both would be equally wrong.
Outcome C · the middle path, and the most likely one. The paper gains stay, and reported profit stops working as a metric. This is already happening: analysts strip the items out, LSEG publishes two numbers side by side. What remains is a figure you can only read with a footnote.
The next data point has a date: Nvidia reports its second quarter on August 26, 2026. In the quarter before, $15.9 billion of $58.3 billion in net income came from equity gains, a good 27 percent, and its holdings of non-marketable equity securities nearly doubled within three months from $22.3 billion to $43.4 billion[11]. The $152 billion in this article is therefore probably not the full number for this quarter.*
Disclaimer · Not investment advice · Disclosure
* This site is run by Max Fraunhofer as a private journalist and holds no BaFin authorisation under § 32 KWG (German Banking Act). This article is journalistic analysis, not investment advice within the meaning of § 1 (1a) sentence 2 no. 1a KWG / § 2 (2) no. 4 WpIG, and not an investment recommendation within the meaning of § 85 WpHG in conjunction with Article 20 of the Market Abuse Regulation. All figures come from public press releases, SEC filings, earnings call transcripts and media reports (see source list). Where evidence is only indirect, this is marked in the text and in the source list. Past performance is not an indicator of future results. Anyone making investment decisions on the basis of this article does so at their own risk and should consult a licensed financial or tax adviser.
Disclosure (conflict of interest): At the time of publication the author holds direct equity positions in, among others, Alphabet, Amazon, Microsoft, Meta, ASML and TSMC, as well as broadly diversified index funds (including MSCI World) through which indirect holdings in other companies mentioned in this article exist. There are no direct positions in Nvidia or Oracle; there are no short positions in any of the securities mentioned.
SourcesEvidence, filings, transcripts
Convention in this article: hard figures, quotes and external model outputs are marked in the text with a superscript source number. Clicking jumps straight to the entry. Three levels of evidence are visually distinguished:
- 01Amazon · earnings release Q2 2026 (July 30, 2026) · Net income $62.647bn, other income (expense), net $53.415bn with the literal addition „primarily from our investments in Anthropic“. Free cash flow TTM minus $7.604bn against plus $18.184bn a year earlier. AWS $42.232bn at plus 36.7 percent. Long-term debt $65.648bn (Dec 31, 2025) to $128.894bn (June 30, 2026). Primary source read directly.
- 02Alphabet · earnings release Q2 2026 (July 22, 2026) · Net income $112.193bn, „gain on equity securities, net“ $99.031bn. Footnote verbatim: the gain increased the provision for income tax, net income and diluted EPS by $21.9bn, $77.1bn and $6.26 respectively. Free cash flow Q2 minus $5.855bn. Equity raise June 2026 of $49.6bn net plus a $40bn ATM programme. Google Cloud $24.768bn at plus 82 percent. Primary source read directly.
- 03Microsoft · FY2026 Q4 results (July 29, 2026) · Revenue $90.0bn, net income $35.766bn, Azure plus 43 percent, free cash flow around $19.6bn, other income (expense), net $3.444bn against minus $1.707bn a year earlier. Verbatim on the discrete items: „These include a $3.2 billion gain from our investment in Anthropic“. OpenAI effect plus $480m in the quarter as an effect on net income, against a loss of $1,575m in the prior-year quarter. Microsoft additionally publishes net income adjusted for OpenAI: $35,286m against $28,808m, or plus 22 percent.
- 04CNBC · „Big Tech's Anthropic and OpenAI stakes are distorting the corporate earnings picture“ (August 3, 2026) · Tajinder Dhillon (LSEG) verbatim: „Without those gains from just Alphabet and Amazon's private company stakes, aggregate earnings growth would be sitting around 29%“, against around 48 percent reported. Also contains Gil Luria (D.A. Davidson) on the point that analysts already strip these items out. Data provider analysis via a media report.
- 05Anthropic · Series H press release (May 28, 2026) · $65bn in fresh capital, $965bn post-money valuation. The price event that triggered the revaluations at Amazon, Alphabet and Microsoft in the same quarter. On the origin of the money, verbatim: „It also includes $15 billion of previously committed investments from hyperscalers, including $5 billion from Amazon.“ Co-led according to the announcement by Capital Group, Coatue, D1 Capital Partners, GIC, ICONIQ and XN, other named investors include Blackstone, Brookfield, Fidelity, Jane Street, Lightspeed, MGX, T. Rowe Price and Temasek. Google appears not as a funder but through a commitment for five gigawatts of TPU capacity together with Broadcom.
- 06Bloomberg · Alphabet's Anthropic stake at around $124bn (July 23, 2026) · Alphabet put the fair value of an unnamed holding in a private company at around $124.3bn as of June 30, 2026 in a separate filing. The attribution to Anthropic comes from Bloomberg, not from Alphabet. Secondary sources describe the filing type inconsistently (8-K or 10-Q), a direct comparison with the original was not possible.
- 07TechCrunch · Microsoft books $3.2bn from its Anthropic investment (July 29, 2026) · Context and classification: Microsoft invested around $5bn in Anthropic in November 2025. The investment amount itself comes from this reporting. Secondary report. The $3.2bn is not evidenced from here but from Microsoft's own press release[03], where it appears verbatim. An earlier version of this article wrongly presented the figure as a pure earnings call quote.
- 08Amazon · additional investment in Anthropic (April 20, 2026) · $5bn immediately on top of the $8bn paid so far, with up to $25bn more committed. Cumulative actually paid in: $13bn. In return, a compute commitment from Anthropic to AWS.
- 09Bloomberg · OpenAI valued at $852bn after completing a $122bn round (March 31, 2026) · Amazon the largest single investor at $50bn, Nvidia and SoftBank at $30bn each. According to the reporting, Amazon's share is structured in tranches, with around $15bn immediate and $35bn tied to conditions. Secondary report.
- 10Silicon Analysts · hyperscaler capex against cash flow (July 10, 2026) · Comparison across providers: Alphabet 63, Meta 61, Microsoft 57 percent capex to operating cash flow. Independent analysis by a specialist blog, not bank research. Amazon's own ratio in this article is calculated from the primary source, not taken from here.
- 11Nvidia · Q1 FY2027 results (May 20, 2026) · Revenue $81.615bn, net income $58.321bn, of which $15.9bn from equity gains ($13.4bn listed, predominantly CoreWeave, $2.6bn non-listed). Next report on August 26, 2026. Holdings of non-marketable equity securities $22.251bn to $43.364bn.
- 12Bloomberg · Microsoft reports over $130bn in new data centre leases (July 29, 2026) · Signed but not yet commenced lease obligations at around $329.1bn as of June 30, 2026, after $196.6bn as of March 31, 2026. Secondary source quoting the filing, no direct comparison possible.
- 13Deloitte DART · roadmap to ASC 323, equity method investments · The presumption of significant influence from around 20 percent of voting rights and its consequence for earnings recognition. Additionally PwC Viewpoint on ASC 321 and the measurement alternative for holdings without readily determinable fair values. Technical literature on the accounting standard, not a company statement.
- 14EY · Technical Line on ASU 2016-01, recognition and measurement of financial assets and financial liabilities · Effective date verbatim: „The guidance is effective for calendar-year public business entities beginning in 2018“, for fiscal years beginning after December 15, 2017. On the abolition of the cost method, verbatim: entities „no longer use the cost method of accounting as it was applied before they adopted ASU 2016-01 for equity securities that do not have readily determinable fair values. As such, the new guidance could significantly increase earnings volatility for some entities.“ Technical publication by an audit firm on the standard, not a company statement.
- 15Time series in Chart 03 · earnings releases for the six quarters, each read directly: Amazon Q1 2026, Q4 2025, Q3 2025 · Alphabet Q1 2026, Q4 2025, Q3 2025. Values for Q1 and Q2 2025 from the comparative columns of the same documents. Amazon: line „Other income (expense), net“ (2.749 · 1.117 · 10.186 · 1.177 · 15.647 · 53.415). Alphabet: line „Gain (loss) on equity securities, net“ (9.758 · 1.286 · 10.734 · 2.302 · 36.915 · 99.031). Alphabet additionally states the after-tax effect per quarter in its footnote, $1.8bn for Q4 2025 and $28.7bn for Q1 2026.
- 16Microsoft · 10-K annual report for fiscal year 2026 (as of June 30, 2026) · On the OpenAI stake, verbatim: „We have an investment accounted for under the equity method that represents an approximate 25% interest on an as-converted basis“ and „We have made total funding commitments of $13.0 billion related to our investment, of which $11.9 billion has been funded as of June 30, 2026.“ On the measurement method: „We calculate our equity method income or loss using the hypothetical liquidation at book value (‚HLBV‘) method because our liquidation rights and priorities differ from our underlying ownership interest.“ Primary source read directly.
- 17Constellation Research · Microsoft's OpenAI stake and its estimated value · Basis for the circulating order of magnitude of around $135bn for Microsoft's OpenAI position. Secondary source with a market value estimate. That value does not appear as such in Microsoft's balance sheet: under the equity method the stake is carried at amounts paid in less losses absorbed, not at a market value. An earlier version of this article wrongly described the $135bn as a book value.