Published: August 27, 2026 | Category: Markets
Alphabet and Amazon, lifted by tens of billions in unrealized investment gains, account for most of the jump that pushed second-quarter profit growth past 50 per cent.
The S&P 500 is on course for its fastest quarterly earnings growth in five years, but most of the acceleration traces to two companies booking paper gains on their own investments. The blended year-over-year earnings growth rate for the index in the second quarter stood at 50.4 per cent in FactSet’s most recent published tally, the highest since the second quarter of 2021, when profits rebounded 91.6 per cent off the pandemic trough.
Alphabet and Amazon are responsible for most of that jump since June 30, according to FactSet’s senior earnings analyst, John Butters. Both reported GAAP earnings per share far above what analysts expected, and both were flattered by large unrealized gains on equity investments recorded as other income. Alphabet posted $9.11 against a $2.88 estimate, a figure that included a $98bn other-income gain driven mainly by net unrealized gains on equity securities. Amazon reported $5.75 against a $1.82 estimate, helped by a $53.4bn other-income gain tied largely to its stake in the AI developer Anthropic.
Those gains distort the headline. Aggregate reported earnings across the index came in 29.2 per cent above estimates, on FactSet data, the largest positive surprise since the firm began tracking the measure in 2008, beating the previous record of 23.2 per cent set in the second quarter of 2020. Strip out Alphabet and Amazon and that beat falls to 10.9 per cent.
The growth rate tells the same story. Excluding the two, blended earnings growth drops to about 32 per cent. That is still an unusually strong reading, the second consecutive quarter above 25 per cent and the seventh straight quarter of double-digit growth for the index, a streak that predates this year’s AI capital-spending boom.
Breadth supports the case that the quarter was broadly good rather than a two-stock illusion. Ten of the index’s eleven sectors reported year-over-year earnings growth, led by energy and communication services, with health care the only sector to post a decline. Revenue growth was firm as well: blended sales rose 15.0 per cent, the fastest since the fourth quarter of 2021, and 76 per cent of companies beat revenue estimates, above both the five- and ten-year averages.
The composition of the surprise matters for how investors read it. Unrealized gains on equity holdings flow through GAAP net income but say little about the operating performance of the underlying business, and they can reverse if markets turn. Alphabet’s and Amazon’s investment portfolios, swollen by positions in fast-rising private AI companies, have turned the two into a swing factor for the entire index’s reported profit.
Valuations leave little room for disappointment. The forward 12-month price/earnings ratio for the S&P 500 is 20.0, above its five-year average of 19.9 and its ten-year average of 19.0. Analysts expect the pace to cool from here but remain elevated, with earnings growth of 27.4 per cent forecast for the third quarter and 25.2 per cent for the fourth, and 30.0 per cent for the 2026 calendar year.
For now the index can claim its best earnings season since 2021. The asterisk is that a meaningful slice of the record rests on two companies marking up their investments, not on the operating engine of corporate America running that much hotter.