Four of America’s largest technology companies reported earnings on Wednesday afternoon, confirming an unprecedented expansion of AI capital spending in the modern era.
In total, $130.65 billion was spent on capital expenditures in the first three months of 2026. That’s more than three times the inflation-adjusted cost of the Manhattan Project in one quarter. They will spend nearly $700 billion this year alone, the same amount the U.S. government spends on Medicare.
The headline profits suggest the bet is paying off. Google’s parent company Alphabet’s profits rose 81% last quarter to $62.6 billion, and Amazon Web Services posted its fastest growth in 15 quarters.
But a footnote in Google’s earnings call and a bullet point under Amazon’s net income section tell a different story about where that profit came from. “Nearly half of Alphabet’s record $62.6 billion in profits (about $28.7 billion) came not at all from search ads, cloud services or other products. This came from Alphabet updating the value of its stake in privately held companies, primarily AI startup Anthropic, in which it held an estimated 14% stake before announcing an additional $40 billion investment last week.”
Amazon disclosed similar numbers more directly. The company said in its earnings call that first-quarter net income “includes $16.8 billion of pre-tax gain included in non-operating income from our investment in Anthropic, which is more than half of Amazon’s pre-tax income (or profit) for the quarter.”
In response to questions from Fortune, Amazon said the price increase was prompted by Anthropic’s Series G financing round and the conversion of some of Amazon’s convertible notes into preferred stock. Amazon says its $8 billion investment in Anthropic is now worth more than $70 billion. They added that Amazon’s investment in Anthropic is separate from any commercial relationship.
Alphabet did not respond immediately. Fortune’s Request for comments.
Robert Willens, a tax and accounting consultant who served as a part-time lecturer at Columbia Business School, said: luck Accounting itself is not debatable. Companies that hold shares in privately held companies need to update the value of their shares when new funding rounds are priced.
What’s different, Willens says, is what’s actually driving the price increases. When you own stock in a publicly traded company like Apple, your value comes from the public market. Millions of institutional and retail buyers and sellers. In Anthropic’s case, that value comes from what a small group of investors agreed to pay in the last round of funding.
Alphabet and Amazon are two such investors. If they put more money into Anthropic or put billions of dollars into Anthropic’s cloud capacity, that’s going to drive up Anthropic’s valuation. And as Anthropic’s valuation rises, the stock Alphabet and Amazon already own will rise with it. They record that increase as profit. In this case, profits will be significantly reduced, even cut by more than half.
In layman’s terms, the more they invest in Anthropic, the more profits Anthropic can report without paying them a single dollar.
“What’s interesting is that they can control the value of their assets, they can influence the value of their assets, and they can market those assets by trading with them. There may be something to be said about that,” Willens said.
This isn’t the first quarter that Big Tech’s profits have been substantially shaped by the price hikes in private AI investments. In the first quarter of 2025, Alphabet posted an $8 billion unrealized gain, which raised eyebrows until Bloomberg pointed out that it was due to the SpaceX report. In the third quarter of 2025, this figure increased to $10.7 billion. Additionally, Amazon discloses Anthropic-specific earnings for each quarter in which it owns the stock.
What makes this quarter so remarkable is its scale. Alphabet’s $36.9 billion equity gain is more than triple its previous peak, and Anthropic’s reported talks at a $900 billion valuation suggest the next price hike could be even bigger.
Willens also recalled that when accounting regulators asked companies to start reporting these unrealized gains as profits in 2018, “everyone said earnings would fluctuate unnecessarily,” and that investors would have a hard time understanding the flurry of profit numbers even though the underlying business was stable. “I think this just confirms the fact that this probably wasn’t the best idea.” [Financial Accounting Standards Board] I’ve never thought of it before. ”
Editor’s note: This article has been updated to clarify that Amazon is disclosing Anthopic’s role in its net income in a footnote to its SEC filing, but also on the earnings cover page.
