Alphabet’s profit soared 81% to $62.6 billion in the first quarter of 2026. Nearly half—$28.7 billion—didn’t stem from search ads or cloud revenue. It came from marking up the value of stakes in private AI firms, led by Anthropic. Amazon mirrored the move. Its net income included $16.8 billion in pre-tax gains from Anthropic investments—over half its pre-tax income for the period.
These aren’t cash windfalls. They’re accounting entries. Required under a 2018 Financial Accounting Standards Board rule, companies must adjust the value of private equity holdings when new funding rounds set fresh prices. Anthropic’s Series G round, plus conversions of Amazon’s convertible notes to preferred stock, triggered the surge. Amazon’s original $8 billion investment now tops $70 billion on its books. Alphabet, with an estimated 14% stake before a fresh $40 billion commitment, booked a $36.9 billion equity gain—triple its prior peak.
Robert Willens, a tax and accounting consultant and Columbia Business School adjunct, called it uncontroversial on the surface. But he flagged the twist. “It’s interesting that they’re able to control or influence the value of one of their own assets,” Willens told Fortune, “and one that they’re able to mark to market by engaging in business transactions with that entity. There might be something to say about that.”
In plain terms: The more these giants pour into Anthropic—via equity or cloud commitments—the higher its valuation climbs. That lifts their existing stakes. Profit materializes. No dividends needed. No sales required. Critics see circular logic fueling headline numbers while core operations grind amid massive spending.
Cloud Surge Masks Capex Strain
AWS hit $37.6 billion in revenue, up 28%—its fastest growth in 15 quarters. AWS AI now runs at a $15 billion annual rate. Google Cloud rocketed 63% to $20 billion, first time ever at that level, with backlog doubling to $460 billion. Microsoft Azure grew 40%. Combined, the big four—Alphabet, Amazon, Microsoft, Meta—dropped $130.65 billion on capital expenditures in Q1 alone. That’s triple the inflation-adjusted Manhattan Project cost. Full-year plans? Nearing $700 billion, rivaling U.S. Medicare outlays.
Amazon CEO Andy Jassy highlighted Trainium chips in earnings. The custom silicon business crossed $20 billion annualized run rate. “We’ve recently shared very large, multi-year, multi-gigawatt training commitments from the two leading AI labs in the world, Anthropic and OpenAI,” Jassy said, per The Register. Anthropic pledged up to five gigawatts of Trainium capacity.
But margins tell another story. Alphabet raised 2026 capex to $180-190 billion. Amazon stuck at ~$200 billion. Meta hiked to $125-145 billion. Microsoft eyes $190 billion for fiscal 2026. Free cash flow? Amazon’s trailing 12 months dipped to $1.2 billion. Investors cheered cloud beats—Alphabet shares up 7%, Amazon climbing post-dip—yet whispers of strain persist. Demand outstrips supply. Capacity constraints linger into 2027.
Anthropic thrives amid the frenzy. Counterpoint Research crowned it Q1 LLM revenue leader at 31.4% global share, edging OpenAI’s 29%, despite far fewer users—134 million monthly versus 900 million. Average revenue per user? $16.20. OpenAI’s sits at $2.20. Talks swirl of a $900 billion valuation round soon, per X chatter and reports.
Amazon’s total Anthropic pledge hits $25 billion, securing a $100 billion, decade-long AWS commitment in return. Google matches with up to $40 billion, blending cash and compute. It’s infrastructure lock-in. Not just venture bets. “That’s the difference between selling capacity and owning the rails,” noted AInvest.
So where’s the bubble talk? Scale. Volatility. OpenAI missed internal revenue targets, citing Anthropic rivalry, per Seeking Alpha. JPMorgan pegs four hyperscalers’ AI data center capex at up to $660 billion this year—66% over 2025. Willens revisited 2018 rules: “Everyone said it would make earnings unnecessarily volatile… This, I suppose, confirms the fact that perhaps this wasn’t the best idea [FASB] ever came up with.”
Past quarters echo. Alphabet’s Q1 2025 $8 billion gain tied to SpaceX. Q3 2025 hit $10.7 billion. Amazon logs Anthropic bumps quarterly. Now? Gains dwarf operations. X users spotlighted it: “Anthropic is the secret sauce this earnings season,” posted @shehzadyounis.
Defenders point to real traction. Google Search grew 19%. Subscriptions hit 350 million paid users. Gemini ramps. AWS backlog: $364 billion. But skeptics question sustainability. If valuations stall—or Anthropic falters—these paper profits reverse. Capex burns cash. Returns? Still emerging.
Big Tech doubled down. No pullback signals. Demand accelerates. Supply lags. As @Venu_7_ tallied on X: “Every CEO said the same thing—capacity constrained, not demand constrained.” The cycle stretches. For now.
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