Alphabet: Record Profit and Worst Cash Flow in Its History, at the Same Time

Money calls for money. There are quarters when you earn money by working, and others when you simply earn it by having had foresight a few years earlier. Alphabet has just experienced the latter case. Its subsidiary SpaceX, along with Anthropic, saw its valuation skyrocket this quarter, pulling Alphabet's net profit to an unprecedented level: $112.1 billion, up 298% year-on-year. Key points of this article:

• Alphabet recorded a net profit of $112.1 billion, up 298%, thanks to its stakes in Anthropic and SpaceX.
• These gains primarily stem from an accounting revaluation of the stakes, without any actual sales, illustrating a complex yet intriguing financial logic.

The details deserve attention. Alphabet holds about 14% of Anthropic's capital, whose valuation tripled in the second quarter: from $380 billion to $965 billion, following a $65 billion funding round confirmed by the company itself.
Add to this an approximately 6% stake in SpaceX, which went public last month with a valuation of $1.77 trillion, and you get a simple equation: these two balance sheet items alone generated $98 billion in net gains for Alphabet this quarter.
According to data released on July 22 and reported by Fortune, Alphabet specifies in its statement that "other revenues reflect an unrealized net gain of $98 billion, primarily from our equity stakes." A cautious formulation to say the essential: no dollar has actually changed hands.
Accounting rules simply require Alphabet to revalue its unlisted minority stakes at market value each quarter. And this time, the note exploded through the ceiling.
The real balance sheet, once the magnifying effect is removed
Once this exceptional gain is set aside, the story becomes significantly more mundane -- not bad, just less spectacular. The operating profit, which truly reflects Google's activity, increased by 30% to about $40.8 billion. A respectable score, but obviously nothing compared to the 298% jump shown at the top of the balance sheet.
The question deserves to be posed bluntly: can we really talk about the "best quarter in history" for a company when most of the gain comes from an accounting entry and not from an actual sale? The answer lies in a nuance. Alphabet has sold nothing, will not touch a cent of this capital gain until an actual sale of its shares, and remains exposed to the reverse risk if the valuations of Anthropic or SpaceX were to decline. The performance is real on paper, hypothetical in the coffers.
And that is the paradox of this quarter: in the same statement, Alphabet shows both the largest net profit in its history and its very first negative available cash flow, weighed down by a doubled AI capex. The two figures do not contradict each other; they simply measure two different things. The net profit includes this accounting gain on Anthropic and SpaceX; the available cash flow, on the other hand, only looks at the money actually received and spent -- and in that regard, no paper gain fills the hole dug by data centers.
This sequence illustrates a broader phenomenon: tech giants have woven a network of cross-investments that mechanically inflate their results as AI valuations soar. Microsoft with OpenAI, Amazon with Anthropic, Alphabet with both: the line between operational performance and financial valuation games blurs a little more each quarter.
The day these valuations slow down -- and market history says they always eventually do -- a whole segment of the profits reported by these giants could melt away as quickly as it appeared, much like what already awaits Anthropic on the road to its IPO.

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