Alphabet reports Q2 2026 earnings on July 22. Most investors going into the print are focused on Search growth and whether Cloud can sustain its acceleration.
But Bank of America's latest note highlights something that could make the headline numbers look unusual: an estimated $80 billion boost to Q2 operating income that has almost nothing to do with Alphabet's core business.
The bank reiterated its buy rating and $430 price objective on Alphabet and raised its Q2 EPS estimate to $8.38, well above the Street consensus of $2.90. The gap comes down to one line item: how Alphabet accounts for the jump in value of its stake in Anthropic.
Alphabet holds roughly 14% of Anthropic, a stake worth approximately $135 billion at Anthropic's latest valuation of $965 billion, the Motley Fool reported. At the end of Q1, Anthropic was marked at $380 billion.
By Q2, that valuation had risen to $965 billion, following a $65 billion fundraising round. Bank of America estimates Alphabet's 14% stake generated roughly $80 billion in unrealized gains, which flows through the company's operating income for the quarter.
Alphabet stock rally exposes Google's unusual AI problem
Google just took crown Verizon held for 22 years
Google CEO says AI has changed revenue picture completely
This pattern already showed up in Q1. Alphabet's net income hit a record $62.6 billion in Q1 2026, but nearly half of that profit came from Alphabet marking up the value of its equity stakes in Anthropic and SpaceX, rather than its ad and cloud businesses, Fortune reported.
The Q2 version of that effect is significantly larger because Anthropic's valuation nearly tripled between the two quarters.
Most analysts following Alphabet haven't fully baked the Anthropic gain into their Q2 models, which explains why BofA's EPS estimate of $8.38 sits so far above the Street consensus of $2.90. Investors will need to strip out that line item to get a clean read on how the underlying business actually performed.
Beneath the Anthropic accounting story, Cloud is the number Bank of America is most focused on. The bank raised its Cloud growth estimate to 70% for Q2, up from the 63% Alphabet delivered in Q1, citing strong enterprise demand indicators and backlog data that point to at least $230 billion in committed revenue over the next eight quarters.
After Q1, Alphabet's Cloud backlog stood at $462 billion, nearly double what it had been the quarter before, as TheStreet reported. Cloud revenue came in at $20 billion in Q1, up 63% year over year, with operating income tripling to $6.6 billion, CNBC reported.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
