S&P 500 earnings growth drops from 48% to 29% when excluding paper gains from private AI investments.
Microsoft, Amazon, and Alphabet reported second-quarter 2026 earnings that surpassed Wall Street estimates, driven partly by unrealized gains from stakes in Anthropic and OpenAI. These markups inflated headline growth, masking weaker underlying performance in ads, cloud, and subscriptions.
S&P 500 earnings grew 48% year over year, but stripping out AI-related investment gains reduces the increase to 29%. Analysts typically exclude such non-operating gains from non-GAAP estimates, as they tend to normalize over time. This quarter’s 7% earnings beat above expectations contrasts with the long-term average of 4.4%.
The trend highlights a divergence between reported profits and core business strength, raising questions about sustainability.