economy
What lies beneath these exceptional earnings
A couple features of the current AI driven boom are skewing the numbers.
TL;DR
- S&P 500 earnings per share are up approximately 47% year-over-year, nearing rates seen after severe recessions.
- Top contributors Amazon and Alphabet reported massive earnings growth, but this was largely due to non-operational, unrealized gains on equity stakes.
- Amazon's earnings were boosted by a $53.4 billion gain related to its stake in Anthropic.
- Alphabet's earnings benefited from a $99 billion gain from its stake in SpaceX.
- Excluding Alphabet and Amazon, S&P 500 earnings growth would be 28.8%, still marking strong double-digit growth.
- Capital expenditures on AI data centers are recognized as assets, with costs depreciated over time, while vendors' profits from these investments are recognized immediately, temporarily overstating aggregate profitability.
- While current profits appear strong, accounting practices and large non-operational gains require a closer examination of underlying trends.