Private AI stakes are reshaping Big Tech net income, but not operating profit

Amazon's $53.4 billion second-quarter pretax gain, primarily from its Anthropic investments, was nearly twice its $27.5 billion operating income, while Alphabet's $99.0 billion equity-security gain increased net income by $77.1 billion, or 69% of the reported total, and Microsoft reported a $3.2 billion Anthropic gain and a $480 million after-tax OpenAI gain. These private AI investment gains are reshaping Big Tech net income but are excluded from operating income, complicating comparisons of recurring business performance.

Private AI stakes are reshaping Big Tech net income, but not operating profit - Amazon’s $53.4 billion second-quarter pretax gain, primarily from Anthropic investments, was nearly twice its $27.5 billion operating income. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx - Alphabet’s $99.0 billion equity-security gain increased second-quarter net income by $77.1 billion, or 69% of the reported total, but its filing does not identify how much came from Anthropic. 3 https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E 4 https://www.secinfo.com/d1yDA3.N28.htm - Microsoft’s latest quarter included a $3.2 billion Anthropic gain and a $480 million after-tax OpenAI gain. The two investments use different accounting treatments, although Microsoft has not disclosed the Anthropic treatment in its earnings release. 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast - Operating income excludes these investment effects at all three companies. Net income and earnings per share include them, complicating comparisons of recurring business performance. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx 3 https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast Private AI investments have become large enough to dominate parts of Big Tech’s income statements. Amazon’s latest Anthropic-related gain was almost twice its operating profit. Alphabet’s broader equity portfolio generated a gain more than twice operating income. Microsoft, meanwhile, reported gains from separate stakes in Anthropic and OpenAI during its June quarter. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx 3 https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast The accounting is legitimate, but the resulting net-income figures combine two economic stories: profit from advertising, cloud computing, software and retail operations, and gains or losses on financial interests in other companies. Those investment effects generally appear below operating income, then flow into pretax income, net income and earnings per share. The distinctions matter. Amazon says its latest gain came primarily from Anthropic. Microsoft separately identifies Anthropic and OpenAI effects. Alphabet reports an aggregated securities portfolio that includes SpaceX and an unnamed private company; its filings do not provide an Anthropic-specific number. Treating every portfolio gain as an Anthropic gain would go beyond what Alphabet discloses. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx 4 https://www.secinfo.com/d1yDA3.N28.htm 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast Amazon’s Anthropic gain exceeded operating income Amazon reported $53.4 billion of second-quarter non-operating pretax other income, primarily from its investments in Anthropic. That compared with $27.46 billion of operating income and $62.65 billion of net income. The pretax gain was 195% of operating income and, as a scale comparison, 85% of reported net income. The latter comparison mixes a pretax item with an after-tax total, so it should not be interpreted as an exact measure of Anthropic’s contribution to net income. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx The cash-flow statement confirms that the gain was non-cash in the quarter. Amazon deducted $53.38 billion of non-operating income when reconciling net income to cash generated by operations. Operating cash flow was $45.39 billion, well below reported net income. 1 https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx Amazon’s first-quarter 10-Q explains the accounting behind its Anthropic holdings. Portions of convertible notes were classified as available-for-sale debt, with unrealized gains recorded in accumulated other comprehensive income. When portions of the notes converted into nonvoting preferred stock, Amazon reclassified the associated gain into earnings. 2 https://www.sec.gov/Archives/edgar/data/1018724/000101872426000014/amzn-20260331.htm The preferred shares are subsequently covered by the measurement alternative for equity securities without readily determinable fair values. They remain at cost unless an impairment or an observable transaction involving the same or a similar security establishes a new value. In the first quarter, Amazon recorded a $12.3 billion upward adjustment and $4.5 billion of reclassification gains tied primarily to Anthropic. 2 https://www.sec.gov/Archives/edgar/data/1018724/000101872426000014/amzn-20260331.htm This is not continuous mark-to-market accounting in the same sense as pricing a publicly traded share every quarter. The income statement changes when a qualifying financing or other observable transaction provides a new valuation, when securities convert, or when an impairment occurs. The timing and size of those events are inherently irregular. The commercial relationship is separate. Anthropic buys AWS capacity and uses Amazon chips, creating operating revenue for Amazon. The investment revaluation itself is not AWS revenue or operating profit. Amazon does not disclose Anthropic’s contribution to AWS sales, so the operating and investment effects cannot be fully reconciled from public filings. Alphabet’s portfolio gain cannot be assigned entirely to Anthropic Alphabet reported a $99.03 billion gain on equity securities in the second quarter. The gain was 243% of its $40.77 billion operating income. Unlike Amazon, Alphabet quantified the tax effect: the securities gain increased income-tax expense by $21.9 billion, net income by $77.1 billion and diluted earnings per share by $6.26. 3 https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E 4 https://www.secinfo.com/d1yDA3.N28.htm Alphabet’s reported net income was $112.11 billion, meaning the after-tax securities gain supplied about 69% of the total. Subtracting the company-disclosed $77.1 billion effect leaves approximately $35.0 billion of net income, or $2.85 per diluted share, excluding the securities gain. That subtraction is an analytical comparison rather than an alternative earnings measure endorsed by Alphabet. 3 https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E The portfolio consisted of a $77.35 billion net unrealized gain on nonmarketable securities accounted for under the measurement alternative, a $21.40 billion unrealized gain on marketable and other equity securities, and $278 million of realized net gains. Alphabet said the increase primarily reflected securities associated with SpaceX and “a private company.” It did not name that private company in the relevant disclosure. 4 https://www.secinfo.com/d1yDA3.N28.htm Alphabet’s nonmarketable securities under the measurement alternative had a carrying value of $124.26 billion on June 30, up from $64.09 billion at the end of 2025. The filing said those securities consisted primarily of an investment in one private company, but again did not identify it. 4 https://www.secinfo.com/d1yDA3.N28.htm Alphabet is known to be an Anthropic investor, and Anthropic may be included in the aggregated figures. The filings nevertheless do not support assigning a specific portion of the $99.03 billion gain to Anthropic. The defensible conclusion is narrower: revaluations across Alphabet’s securities portfolio were substantially larger than quarterly operating income and drove most of reported net income. As with Amazon, the gain is separate from cloud operations. Google Cloud’s revenue and operating income appear above the non-operating investment line. Any cloud revenue from Anthropic is part of recurring operations; any increase in the carrying value of Alphabet’s investment is not. Alphabet does not disclose enough customer-level information to connect the two. Microsoft reported separate Anthropic and OpenAI gains Microsoft’s June quarter adds a third accounting pattern. The company reported $40.60 billion of operating income, $3.44 billion of other income and $35.77 billion of net income. Management identified a $3.2 billion gain from its Anthropic investment among the discrete items affecting the quarter. That gain was equivalent to about 8% of operating income and 9% of net income, although the latter again compares a pretax gain with an after-tax total. 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast The earnings release does not explain which accounting model Microsoft applied to Anthropic or disclose the gain’s exact after-tax effect. It also combines the Anthropic gain with several expense variances when saying discrete items benefited diluted earnings by $0.27. The $0.27 therefore cannot be attributed solely to Anthropic. 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast Microsoft gave more detail for OpenAI. Its OpenAI investments increased fourth-quarter net income by $480 million, or $0.07 per diluted share. That represented about 1.3% of quarterly net income. For the full fiscal year, OpenAI increased net income by $4.96 billion, or 3.7% of the $133.75 billion reported total. 5 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast Those annual numbers conceal substantial quarterly volatility. Microsoft recorded a $4.1 billion OpenAI loss in its September quarter, followed by a $10.0 billion pretax gain in the December quarter. The December gain increased net income by $7.58 billion. The effect then fell to a $19 million pretax loss and a $14 million reduction to net income in the March quarter before returning to a $480 million after-tax gain in June. 6 https://www.microsoft.com/en-us/investor/earnings/fy-2026-q2/press-release-webcast 7 https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q3/press-release-webcast 8 https://www.microsoft.com/en-us/investor/events/fy-2026/earnings-fy-2026-q1 Microsoft accounts for its OpenAI interest under the equity method. Before OpenAI’s recapitalization, the reported effect primarily reflected Microsoft’s share of OpenAI’s losses. After the recapitalization, Microsoft said it recognizes its share of changes in OpenAI’s net assets, and it recorded a dilution gain when its proportional ownership declined. 6 https://www.microsoft.com/en-us/investor/earnings/fy-2026-q2/press-release-webcast 8 https://www.microsoft.com/en-us/investor/events/fy-2026/earnings-fy-2026-q1 That mechanism differs from the observable-price adjustments used for many private equity securities at Amazon and Alphabet. OpenAI’s operating losses can affect Microsoft’s results, as can changes to OpenAI’s balance sheet and transactions that alter Microsoft’s ownership percentage. None of those effects is Microsoft operating revenue. Operating income is the cleaner boundary—but not the whole story At all three companies, operating income provides the simplest first separation between business performance and investment accounting. Amazon’s Anthropic gain, Alphabet’s equity-security gains and Microsoft’s disclosed investment effects appear below operating profit. Removing them analytically does not mean the partnerships are irrelevant to operations. Anthropic and OpenAI are also cloud customers, model suppliers and commercial partners. Cash flow provides a second check. Unrealized revaluations and dilution gains raise net income without generating equivalent operating cash in the same period. The cash-flow statements reverse non-cash investment gains when reconciling net income to cash from operations. A later sale or distribution could generate cash, but that is a separate event. The phrase “mark-to-market” should also be used carefully. Publicly traded securities are remeasured to market prices. Private securities under the measurement alternative are generally adjusted when observable transactions or impairments occur. Equity-method investments reflect the investor’s share of the investee’s results or net-asset changes, depending on the structure. These methods can all create volatile net income, but they are not interchangeable. The filings support a more precise conclusion than the claim that private AI stakes uniformly make Big Tech’s operating story weaker. Amazon, Alphabet and Microsoft all reported substantial operating income independently of the investment gains. What the gains distort is the comparison between operating performance and headline net-income or earnings-per-share growth. Readers need both sets of figures—and the accounting notes—to see the difference. Companies mentioned Further sources 1 Amazon, “Amazon.com Announces Second Quarter Results,” July 30, 2026. ↗ https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx 2 Amazon, Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, inc… ↗ https://www.sec.gov/Archives/edgar/data/1018724/000101872426000014/amzn-20260331.htm 3 Alphabet, “Alphabet Announces Second Quarter 2026 Results,” Form 8-K exhibit, J… ↗ https://www.publicnow.com/view/9DA6BCAE119C05F38A597E1A5C62A498212FF33E 4 Alphabet, Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, in… ↗ https://www.secinfo.com/d1yDA3.N28.htm 5 Microsoft, fiscal 2026 fourth-quarter earnings release, July 29, 2026. ↗ https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast 6 Microsoft, fiscal 2026 second-quarter earnings release and conference call, Jan… ↗ https://www.microsoft.com/en-us/investor/earnings/fy-2026-q2/press-release-webcast +2 more The stories that matter, in one email. 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