# Alphabet's $124 billion Anthropic stake reshapes how investors should read Google's earnings > Source: > Published: 2026-07-24 04:28:27+00:00 *Alphabet's Anthropic stake is now big enough to distort how you read Google earnings. The core business is strong, but the paper gains are too large to treat as noise.* Alphabet's second-quarter report looked like a clean victory until you looked at where the profit came from. The Google parent posted $112.11 billion in net income for Q2 2026, according to the Associated Press, up from $28.2 billion a year earlier. Earnings per share came in at $9.11. The number is huge. It also tells you less about Google Search, YouTube, or Google Cloud than the headline suggests. The distortion came from equity securities. MarketWatch reported that Alphabet booked about $98 billion in net unrealized gains, mainly tied to investments such as SpaceX and Anthropic. That is the kind of accounting line that can make a quarter look historic without adding the same amount of cash to the business. You need to separate the operating company from the investment portfolio, or you are reading the wrong story. Anthropic is the harder piece to ignore. The company raised $65 billion in May at a $965 billion post-money valuation, according to TechCrunch, in a Series H round backed by investors including Altimeter Capital, Dragoneer, Greenoaks, Sequoia Capital, Capital Group, Coatue and D1 Capital Partners. The Motley Fool noted on July 5 that court documents put Alphabet's Anthropic stake at roughly 14%, capped at 15%, which would value the position at about $135 billion at Anthropic's latest private mark. That is not a rounding error inside Alphabet anymore. It is larger than many public companies investors already model carefully, and it sits inside a business most people still treat mainly as an advertising and cloud story. Frankly, that old reading is now too simple. Anthropic has also moved closer to a public listing. The company said in a June 1 blog post that it confidentially submitted a draft Form S-1 to the SEC for a proposed IPO, while making clear that the number of shares and price had not been set. Fortune, citing Bloomberg reporting, said the filing could set up a debut as soon as this fall, though a confidential S-1 can still go nowhere. You should keep that caveat in the front of your mind. Private valuations are promises until public buyers agree with them. The revenue growth is why investors are willing to listen. Fortune reported that Anthropic's annualized revenue run rate hit $47 billion in May and that the company had told investors it expected the figure to surpass $50 billion by the end of the next month. A year earlier, its run rate was about $4 billion. That kind of climb explains why Alphabet's stake has become so valuable so quickly. It does not make the valuation safe. ## The paper profit problem Alphabet's operating business still had a strong quarter. Revenue rose 24% year over year to $119.8 billion, AP reported. Investor's Business Daily said Google Cloud revenue jumped 82% to $24.77 billion, helped by demand for AI services and TPU capacity. Search advertising held up. YouTube grew too. There is real money underneath the noise. But the earnings line now carries two stories at once. IBD estimated that gains from equity securities added $6.26 a share to Alphabet's EPS, leaving normalized EPS closer to $2.85, slightly below analyst expectations. That is why a beat can still feel messy. The business performed, but the reported profit was carried by paper gains from companies Alphabet does not control. Investors reacted to the other side of the AI bet as well. Alphabet raised its 2026 capital expenditure outlook to $195 billion to $205 billion, according to MarketWatch and Barron's, and the company reported negative free cash flow for the quarter as spending on AI infrastructure surged. Shares fell after the report. That was not panic. It was a judgment on cash. If you own Alphabet, you are now holding three things at once: a dominant search business, a fast-growing cloud infrastructure business, and a private-market AI portfolio whose value can move reported earnings by tens of billions of dollars. Those are different assets. Price them accordingly. ## The IPO will test the mark An Anthropic IPO would do something private rounds cannot. It would put a tradable price on Alphabet's stake and show whether public investors believe the near-trillion-dollar valuation. The Motley Fool argued that a $1 trillion IPO was already a realistic base case. Prediction markets and private-market commentary may be noisy, but the direction is clear: Anthropic has become one of the main tests of whether the AI valuation boom can survive in public markets. Here's the thing. Search, YouTube and Cloud already justify Alphabet on their own. But the Anthropic stake is now large enough to change how quarterly numbers look, how investors explain EPS, and how much volatility they should expect from a line item that is not Google's operating engine. **Also read:** [OpenAI Presence lands and software stocks take another hit in a brutal year for SaaS](https://startupfortune.com/openai-presence-lands-and-software-stocks-take-another-hit-in-a-brutal-year-for-saas/) • [AI-generated image fraud is headed for $40 billion and founders are not ready for the compliance wave coming with it](https://startupfortune.com/ai-generated-image-fraud-is-headed-for-40-billion-and-founders-are-not-ready-for-the-compliance-wave-coming-with-it/) • [Innovaccer crosses $200 million in ARR as its agentic AI bets on cracking healthcare's data problem](https://startupfortune.com/innovaccer-crosses-200-million-in-arr-as-its-agentic-ai-bets-on-cracking-healthcares-data-problem/)