"AI paper wealth" sweeps the U.S. stock earnings season: Anthropic and OpenAI's equity significantly boost tech giants' profits as Wall Street shifts to judging cash flow.

The risk investment portfolios of major American tech giants are making corporate profits appear significantly stronger than they really are. In other words, the equity holdings of large tech companies in Anthropic and OpenAI are significantly distorting the earnings landscape of American businesses. The latest financial reports show that Microsoft, Amazon, and Alphabet, Google's parent company, recorded substantial investment gains in the most recent quarter thanks to their holdings in Anthropic and OpenAI. One of these companies also benefited from its stake in SpaceX, which went public on U.S. stock markets in June. The earnings season for U.S. stocks is not lacking in genuine growth, but the value of equity holdings in Anthropic and OpenAI has undoubtedly magnified surface EPS profit data. Wall Street's future pricing models may revert to focusing on operating profits and free cash flow. This means that when assessing the profitability quality of large tech companies, Wall Street may prefer to focus on the operating profit, operating cash flow, and free cash flow after excluding equity revaluations, rather than viewing the book appreciation in other income as sustainable cash profits. As the AI investment craze continues, the valuations of both Anthropic and OpenAI have surged dramatically in the private market, with both companies valued just below $1 trillion. Microsoft and Amazon are key shareholders in these non-public companies, while Google holds a stake in Anthropic. Therefore, these companies need to recognize the significant gains from the rising value of their equity holdings in their quarterly profit statements. However, this does not represent profits generated from selling software or other operational services. According to data compiled by LSEG, the earnings from these non-public investments held by a few companies have had an extraordinarily significant impact on the overall profit growth in the U.S. stock earnings season. The second quarter of 2026 indeed displays a very strong U.S. stock earnings season, but approximately 45%48% of the earnings growth of the S&P 500 is significantly overstating the true acceleration of core business operations. The latest figures from FactSet show that the index's earnings grew by 47.4% year-over-year; if Alphabet and Amazon are excluded, the growth rate drops to 28.8%. Wall Street's financial giant Goldman Sachs pointed out that the overall EPS of the S&P 500 index skyrocketed by 45% year-on-year in the second quarter, but 19 percentage points of that came from unrealized gains on equity investments in Alphabet and Amazon; upon exclusion, the actual earnings growth rate is about 26%. More notably, the growth is highly concentrated in the AI computing infrastructure industry chain, with the top ten companies contributing nearly 80% of the EPS increase. Amazon's recently confirmed $53.4 billion in non-operating pre-tax earnings primarily comes from Anthropic, and Alphabet reported $98 billion in other income, mainly arising from unrealized equity securities appreciation. These revenues comply with accounting rules, but they do not reflect business profits generated from cloud computing services aimed at AI inference or from advertising or software businesses, nor do they generate corresponding cash flow of the same scale. This strong Q2 earnings quarter is not a false prosperity, but rather a combination of robust fundamental earnings layered on top of exceptionally high private equity valuation gains. Although OpenAI and Anthropic are not publicly listed, they have already rewritten the profit trends of the U.S. stock earnings season. Tajinder Dhillon, Head of Earnings and Stock Research at LSEG, stated that the EPS earnings of S&P 500 constituent companies are expected to see a substantial year-over-year increase of about 48% in the most recent quarter. Dhillon noted that if we exclude the investment gains from non-public AI companies, the earnings growth would be significantly more moderate. Dhillon stated that just by excluding the earnings from the equity holdings in non-public companies held by Alphabet and Amazon, the overall earnings growth rate would drop to about 29%. This figure comes closer to the previously benchmark consensus forecast from Wall Street analysts, which anticipated an earnings growth of approximately 24% for the quarter. Gil Luria, Managing Director and Head of Technology Research at D.A. Davidson, remarked, Overall earnings data has been largely lifted by the equity gains from OpenAI, Anthropic, and SpaceX. Nevertheless, such value fluctuations often offset each other over time, so we typically exclude them from non-GAAP measures and benchmark forecasts. Most analysts have excluded these one-off items from their forecasts. However, in the short term, this results in a further widening of the overall corporate earnings beat expectations. According to LSEG data, this quarter, companies reported second-quarter earnings that exceeded expectations by an average of 7%, compared to a long-term average of 4.4% above consensus expectations. This change in earnings is particularly important because the mega-cap tech giants exert a tremendous weight influence on the stock market, and these stocks have an extraordinarily large weight in benchmark indices. According to LSEG data, the so-called "Magnificent Seven" accounts for about 35% of the S&P 500 index's revenue in the second quarter. For about the past year, this group of tech stocks has represented about one-third of the entire U.S. large-cap stock index. These investment gains are typically categorized as other income, leading to significant reporting discrepancies among different tech companies. Amazon is also a major supporter of OpenAI and committed to investing $50 billion in this ChatGPT developer at the end of February. Amazon is also an early venture investor in Anthropic. Amazon's second-quarter earnings increased by more than 240% year-over-year, but if we exclude these investment gains, the growth is closer to 17%. In that quarter, Amazon reported $53.4 billion in earnings, stating that a portion indeed came from its investment in Anthropic. Alphabet, Google's parent company, also experienced a similar situation, primarily benefiting from SpaceX. Alphabet holds about 5% of the rocket company owned by the world's richest person, Elon Musk. Alphabet's net profit growth surged nearly 300%; if we exclude the gains from SpaceX and Anthropic, the growth is closer to 23%. For Microsoft, the impact is relatively mild. Due to investment gains from its stake in Anthropic, its earnings growth was boosted by about 10 percentage points; the company also recorded $3.2 billion in net profit gains, stating that this income mainly came from Anthropic. Microsoft also confirmed $480 million in gains from its investment in OpenAI. This phenomenon highlights how closely related the AI technology leaders Anthropic and OpenAI are to large tech companiesthis relationship has existed even before they entered the public market. Both Anthropic and OpenAI have secretly filed documents with the U.S. Securities and Exchange Commission, with plans to go public within the next year. Luria noted that these earnings changes may balance out as market volatility increases, and the impact is bidirectional. For example, after its IPO, SpaceX's stock price has already fallen about 50% from its peak. He stated, Specifically, depending on SpaceXs current trading price, Alphabet's market-valued earnings may see a significant reversal when announcing performance for the quarter ending in September. If Anthropic successfully goes public in September, it may offset this impact, but it is still too early to make a judgment. There are also those who believe that even counting this extra income from large tech companies, the fundamental earnings growth of corporations remains healthy. Jeff Kilburg, founder and CEO of KKM Financial, referred to the massive profits earned by tech giants as a sprinkling of sugar on an already strong earnings season. Kilburg noted that even without accounting for non-public assets, the leap in corporate earnings remains astounding. The leaders in AI large model technology are not publicly listed; profits are listed first: the paper wealth behind the explosive growth of S&P 500 earnings. The different S&P 500 overall profit growth figures of around 48% and 29%, along with Goldman Sachs' numbers of 45% and 26%, primarily stem from variations in statistical timing, sample coverage, and adjustment criteria, but the conclusion seems highly unanimous: the so-called investment income fluff cannot obscure that the core businesses of large tech companies are still expanding. Amazon's second-quarter sales grew by about 20%, and operating profit rose by about 43%, with its cloud computing platform AWS seeing a significant revenue increase of 37%; Alphabet's operating profit grew by 30%, and its operating profit margin rose to 34%; Microsoft's net profit and EPS, excluding the impacts of the OpenAI investment, still grew by 22% and 23%, with cloud business revenue increasing by 27%. The strong growth data from these cloud computing giants largely indicates that AI revenue is being generated through cloud services, B2B advertising efficiency, and enterprise operating software, but earnings growth at the index level is becoming increasingly concentrated among a few AI platforms, chip giants, and cloud infrastructure companies. As a result, the market has begun to lower its rewards for simply EPS beating expectations, turning instead to examine the growth rates of cloud businesses, order backlogs, operating profit margins, and free cash flow after capital expenditures: paper revaluations can create a one-time earnings surprise, but only customer payments and operating cash flow can support long-term valuations. The gains formed by rising valuations of Anthropic, OpenAI, or SpaceX equities mainly fall into the category of unrealized non-cash gains: they inflate the other income on the profit and loss statement, net profits, and investment values on the balance sheet, but the company does not receive cash as a result. In the indirect cash flow statement, such gains are usually deducted from net profits; for example, when Microsoft adjusts net profit to operating cash flow, it separately excludes confirmed investment and derivative net gains, and Amazon does the same for non-operating income, so the related book gains do not directly increase operating cash flow. A deeper risk lies in the fact that tech giants not only invest in leading AI large model companies like Anthropic and OpenAI, but also sell them cloud computing power, provide financing, and revalue equity based on subsequent financing or IPO prices, forming a highly intertwined structure of capital investmentcloud ordersvaluation increasebook gains. When private equity valuations rise, it simultaneously reinforces profits, balance sheets, and the narrative of AI investment; conversely, when volatility turns, it can quickly revert back into other income. Meanwhile, Goldman Sachs expects that capital expenditures by major AI providers will rise from about $755 billion in 2026 to approximately $920 billion in 2027, and technology giants may issue about $400 billion in investment-grade bonds in 2027. Therefore, investors should not negate the entire earnings season due to the broad EPS explosion in the S&P 500 index during the second quarter, nor should one capitalize on one-off equity gains as permanent profits; what will truly determine the future trajectory of large tech stocks will be the growth rate of operating profits after excluding equity revaluations and whether AI capital expenditures can generate a sustained free cash flow return sufficient to cover depreciation, interest, and financing costs.