Major technology firms including Microsoft, Amazon, and Alphabet recorded substantial increases in quarterly earnings that were substantially driven by appreciation in their stakes in artificial intelligence companies, according to market analysis.
Amazon, Microsoft, and Alphabet each hold significant investments in privately-held AI firms that have experienced rapid valuation growth. Amazon committed $50 billion to OpenAI in late February and maintains an early investor position in Anthropic. Alphabet holds approximately 5% of SpaceX and maintains a stake in Anthropic. Microsoft has positions in both OpenAI and Anthropic. The rise in valuations of these private companies prompted the tech firms to record mark-to-market gains on their balance sheets, contributing meaningfully to reported net income.
According to LSEG analysis, the unrealized investment gains created a significant distortion in headline earnings metrics. S&P 500 earnings growth appeared to reach approximately 48% year-over-year, but removing the private company investment gains from just Alphabet and Amazon would reduce aggregate earnings growth to around 29%, closer to the 24% consensus forecast. Amazon experienced earnings growth of more than 240% year-over-year, though this declined to approximately 17% when excluding a $53.4 billion gain attributed primarily to Anthropic holdings. Alphabet’s bottom-line growth surged nearly 300%, which would have been closer to 23% absent gains from SpaceX and Anthropic. Microsoft’s earnings growth received approximately 10 percentage points of support from Anthropic investment gains, translating to $3.2 billion of net income impact, plus a $480 million gain in its OpenAI stake.
Market analysts largely exclude such one-time investment gains from forward-looking estimates and non-GAAP adjusted figures. Nevertheless, the phenomenon contributed to corporate earnings beating consensus expectations by 7% in the quarter, exceeding the historical average of 4.4%. Anthropic and OpenAI have each confidentially filed with the SEC and are expected to pursue public listings within the following year. Analysts note that future volatility in private company valuations could produce reversals in mark-to-market gains, potentially affecting subsequent quarter results in either direction.
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