By JBizNews Desk
May 11, 2026
Wall Street’s blockbuster first-quarter earnings season may not be as strong as headline numbers suggest, according to a new warning from Goldman Sachs, which says a massive portion of the S&P 500’s profit growth came from investment gains booked by just two technology giants rather than broad operational strength across Corporate America.
Analysts at Goldman Sachs said this week that the S&P 500’s reported earnings surge has been heavily distorted by extraordinary non-operating gains recorded by Amazon and Alphabet, the parent company of Google. While the market celebrated what appeared to be one of the strongest earnings seasons since 2021, the bank argues the underlying picture is significantly less dramatic once those gains are stripped out.
According to a FactSet Earnings Insight report dated May 4, blended earnings growth for the S&P 500 climbed to 27.1%, sharply higher than the roughly 15% growth rate analysts had expected only weeks earlier. Much of that acceleration came from the so-called Magnificent 7 technology companies, whose combined earnings growth surged to 61%.
But the biggest drivers were not traditional business operations.
Amazon recorded a massive $16.8 billion pre-tax gain tied to its investment in artificial intelligence startup Anthropic, dramatically boosting quarterly profitability. The gain helped push Amazon’s net income to approximately $30.3 billion for the quarter despite more moderate growth in its underlying retail and cloud businesses.
At the same time, Alphabet reported roughly $37.7 billion in other income, largely tied to unrealized gains on private-company equity investments. That helped drive an 81% jump in net income to approximately $62.6 billion, while earnings per share surged 82% to $5.11.
Remove those investment gains, Goldman analysts noted, and underlying S&P 500 earnings growth falls closer to roughly 16% — still healthy, but far below the near-30% figure dominating Wall Street headlines.
“The market might still be growing, but it is a lot more concentrated than the headline numbers suggest,” Goldman Sachs analysts wrote, characterizing the earnings picture as increasingly distorted by a small number of outsized technology companies.
The warning highlights how heavily modern index performance has become dependent on a handful of mega-cap firms whose market values now exert enormous influence over both earnings and stock market benchmarks.
Alphabet, with a market capitalization approaching $4.8 trillion, and Amazon, valued near $3 trillion, carry enormous weight inside the S&P 500. Their accounting gains alone materially lifted the index-wide earnings growth figure, creating what some analysts describe as a misleading picture of broader corporate profitability.
The dynamic also underscores how deeply the AI investment boom is reshaping corporate balance sheets.
Technology giants that invested early in artificial intelligence infrastructure and startup ecosystems are now booking enormous paper gains as private AI valuations soar. Those gains flow through company income statements despite having little connection to core operational revenue from selling products, advertising, or cloud services.
In Amazon’s case, the gain tied to Anthropic reflected private-market valuation increases rather than operating cash flow generated by Amazon Web Services or e-commerce operations.
Goldman analysts additionally noted that AI-related investment activity could account for nearly 40% of S&P 500 earnings-per-share growth this year — a statistic that further illustrates how dependent the broader earnings narrative has become on the artificial intelligence boom.
For investors, the distinction matters.
Headline earnings growth often drives market sentiment, valuation multiples, and expectations for future economic expansion. But when a disproportionate share of those gains originates from investment revaluations rather than operating performance, analysts warn the broader market may be less fundamentally strong than headline figures imply.
The concern comes as U.S. equity indexes continue trading near record highs fueled largely by optimism surrounding artificial intelligence spending, cloud infrastructure demand, and semiconductor investment.
Investors have poured capital into mega-cap technology stocks over the past year, betting that AI-driven productivity gains and software automation will generate a new wave of corporate profitability across the economy.
But Goldman’s analysis suggests the current earnings cycle may be narrower than many investors realize.
Outside the largest technology firms, profit growth across many sectors remains positive but far more modest, particularly in industrials, consumer goods, transportation, and regional financial companies facing slower economic growth and higher financing costs.
The report also reflects a broader Wall Street debate emerging this year over whether markets are accurately pricing sustainable operational growth or simply rewarding companies benefiting from AI-related valuation expansion.
As the artificial intelligence investment cycle accelerates, analysts say investors may increasingly need to distinguish between recurring operating profits and temporary gains tied to rising private-market valuations.
For now, however, the AI trade continues dominating Wall Street — even if the earnings boom underneath it may be far more concentrated than the headlines suggest.
— JBizNews Desk
© JBizNews.com. All rights reserved. This article is original reporting by JBizNews Desk. Unauthorized reproduction or redistribution is strictly prohibited.
