Alphabet's $8.96 SpaceX Gain Inflates S&P 500 Q2 EPS to $90.55

Q: Could a single accounting rule be artificially inflating the entire stock market to dangerous new heights?

Not by itself, but it is clearly inflating reported earnings for the biggest U.S. stock index and that can help justify higher prices than underlying operations alone would support. The rule at issue is FASB’s ASU 2016-01, which requires many equity stakes to be marked to market each quarter, with unrealized gains and losses running through net income. In today’s market, that matters because a few mega-cap tech companies hold large stakes in fast-rising private AI and space companies. When those holdings are revalued upward, the gains boost GAAP earnings even though no cash is realized. The distortion is large enough to change the market’s headline story. Joe Abbott’s review found that in Q1 2026, $5.22 of the S&P 500’s $75.03 EPS came from Alphabet, Amazon and Meta. In Q2, Alphabet alone added $8.96 per share to index EPS. Removing those gains cuts year-over-year S&P 500 earnings growth from 19.0% to 10.6% in Q1 and from 35.8% to 22.3% in Q2. Earnings growth remains solid, but much less explosive. That does not mean the whole market is a mirage. Revenues, cloud demand and AI-related spending are genuinely strong. But it does mean valuations may be leaning on lower-quality earnings concentrated in a handful of stocks that already dominate the index. The real danger is concentration and reversal risk. If private valuations fall, these paper gains can disappear or turn into losses, hitting reported profits, sentiment and index performance at the same time.

1 articles · Updated · yardeniquicktakes.com · Jul 26

$90.55 in S&P 500 Q2-2026 EPS so far includes an $8.96-per-share boost from Alphabet’s mark-to-market gain, driven largely by its SpaceX stake.
GAAP rules require unrealized equity gains and losses to run through income statements, letting a few venture-heavy mega-caps materially skew the index’s aggregate earnings picture.
Removing those gains cuts the S&P 500’s Q2 year-over-year earnings growth to 22.3% from 35.8%, though the adjusted pace still points to solid underlying profit growth.
The same distortion appeared in Q1, when Alphabet, Amazon and Meta added a combined $5.22 per share, lifting reported growth to 19.0% from an adjusted 10.6%.