This 1 Company Is By Far the Largest Contributor to Second-Quarter S&P 500 Earnings Growth
Alphabet (GOOG -0.57%) (GOOGL -1.23%) delivered a massive earnings beat last week, and it’s driving S&P 500 earnings growth to the highest level since 2021. The mega-tech company posted earnings per share of $9.11, more than three times the $2.90 expected by Wall Street.
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$332.57
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60.94%
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0.25%
According to FactSet, which tracks all S&P 500 financial results, Alphabet is now the largest contributor to year-over-year earnings growth for the S&P 500 for the second quarter. Without Alphabet’s standout performance, earnings growth for the quarter would drop from 37.9% to 25.9%. Keep in mind that the company is just one of 500 in the index.
Yet much of Alphabet’s surprising earnings figure was the result of $98 billion in unrealized gains on equities it holds. (The company also posted revenue of $119.8 for the quarter, up 24% from the same quarter a year ago. ) Alphabet owns approximately 4% of Space Exploration Technologies (SPCX +4.01%), and that stake was valued at about $94 billion after the company’s June initial public offering. That’s quite a gain on its original investment in SpaceX, which was less than $1 billion.
Space Exploration Technologies
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Alphabet’s huge gain is only on paper for now
Of course, that’s a paper gain right now. As is typical for early investors in IPO stocks, the position is currently restricted from sale. Some $80 billion is under short-term restrictions, and the rest can’t be sold until late next year.
Ironically, SpaceX’s own financials won’t be reflected in S&P 500 earnings this year, as the company is not eligible to join the index until mid-2027 at the earliest. Even if it were already in the index, it would contribute nothing to S&P 500 earnings for the quarter, as the average Q2 earnings estimate for SpaceX is a loss of $0.28 per share.
However, because Google’s investment in SpaceX grew enormously after the IPO, S&P 500 earnings growth is looking extremely healthy at the moment.
Image source: Getty Images.
There may be more such stock gains for Alphabet ahead. The company also holds a substantial stake in AI company Anthropic, the maker of the Claude chat engine. Alphabet’s investment in Anthropic could also increase significantly when it goes public, which it has filed to do as soon as this fall. It’s difficult to know at the moment what will happen to Anthropic’s stock once it IPOs, but, like SpaceX, it’s expected to achieve a $1 trillion valuation or higher. That would put a big tradable price on Alphabet’s stake.
Alphabet’s extremely successful investments don’t tell investors much about its own operations, but investors in the company share in those gains regardless.
