Key Points:
- Alphabet and Amazon reported $53 billion in “other income” during the first quarter of 2026.
- Private equity investments contributed to nearly 60% of the first-quarter income for Alphabet and Amazon combined.
- Microsoft holds a massive 27% equity stake in OpenAI’s for-profit business following a recent restructuring.
- Amazon currently owns an estimated 15% to 20% stake in the rising artificial intelligence startup Anthropic.
The incredible financial numbers reported by Big Tech companies might look spectacular on the surface, but looking deeper reveals a very different story. The overall quality of recent Big Tech earnings may not matter much right now, as retail investors are completely swept up in the artificial intelligence boom. The hype surrounding new software and smart chatbots seems to blind the market to the actual underlying math driving the massive quarterly reports.
In the near future, investors will inevitably start questioning how strong these Big Tech earnings really are. Right now, the massive profits reported by technology giants are heavily boosted by the rising valuations of their financial stakes in private, smaller tech players. It creates a wild situation of circularity in investing, where massive public companies pump money into small private startups, and then use the growing value of those same startups to inflate their own quarterly profit numbers.
Goldman Sachs strategist Ben Snider pointed out this troubling trend in a new note to clients. “The hyperscalers’ earnings growth this quarter was boosted by an unusually large contribution from equity stakes in private companies,” Snider explained. He warned investors to look closely at the “other income” lines on corporate balance sheets rather than focusing solely on headline revenue numbers.
The specific numbers reported by the technology giants during the first quarter of 2026 highlight the sheer scale of this accounting strategy. Alphabet and Amazon generated combined “other income” totaling a staggering $53 billion. To put that massive figure into perspective, this specific category accounted for nearly 60% of the total income generated by those two massive companies during the quarter.
This accounting maneuver impacts the entire technology sector. Snider noted that this “other income” accounted for 34% of the $155 billion in total income reported by the five largest hyperscalers this quarter. He emphasized that this represents the largest collective share of earnings attributable to “other income” for the group in at least a decade. It clearly shows a major shift in how these massive corporations generate their reported wealth.
The source of this massive windfall is no secret to financial analysts. Of the $53 billion recorded as “other income” by Alphabet and Amazon, roughly $49 billion was attributable to the rising value of equity stakes held in private companies. Because these private artificial intelligence startups are currently valued at astronomical levels by venture capitalists, the corporate giants holding their shares can claim massive unrealized gains on their own quarterly balance sheets.
A closer look at specific corporate investments shows exactly how this strategy plays out in the real world. Amazon, for example, holds a significant minority stake in Anthropic, one of the leading artificial intelligence startups. Financial experts currently estimate that Amazon owns between 15% and 20% of the young company. As Anthropic continues to secure massive funding rounds and achieve sky-high valuations, Amazon gets to reflect that growing value on its own quarterly earnings report.
Microsoft relies on the same strategy with its own massive artificial intelligence partner. Following a major corporate restructuring in October 2025, Microsoft secured a roughly 27% equity stake in the new for-profit business entity of OpenAI. That massive stake in the creator of ChatGPT guarantees that Microsoft will continue to see significant boosts in its “other income” as OpenAI’s valuation approaches the $500 billion mark.
While this accounting strategy remains perfectly legal and standard, it creates a dangerous illusion of core business growth. A significant portion of the massive profits reported by Alphabet, Amazon, and Microsoft comes from simply holding stock in other fast-growing companies, rather than from selling more of their own core products or services. If the artificial intelligence bubble ever pops and the valuations of startups like OpenAI and Anthropic suddenly crash, the massive “other income” profits that have been holding up Big Tech earnings will disappear overnight.
