I. Stocks
Stop the music! S&P 500 earnings per share (EPS) have been significantly distorted by huge capital gains on investments by Alphabet and Amazon and a tax-related gain from Meta. Because GAAP accounting rules force companies to record unrealized equity gains and losses directly on the income statement, a small group of tech and venture-heavy mega-caps can create significant noise in the S&P 500's aggregate earnings growth numbers, masking the underlying operating trends of the broader market.
We asked our colleague, Joe Abbott, to have a closer look. He reports: "S&P 500 Q1-2026 EPS was finalized at $75.03 (chart). It was boosted by a total of $5.22 per share in mark-to-market (MTM) investment and tax gains recognized by three companies reporting on a GAAP accounting basis: $3.14 in MTM gains for Alphabet, $1.42 in MTM gains for Amazon, and a $0.66 tax reversal gain for Meta.
"For Q2-2026, the S&P 500’s earnings per share of $90.55 (so far in the earnings reporting season) was boosted by Alphabet’s astonishing MTM gain, particularly on SpaceX. It added $8.96 to the S&P 500’s EPS."
While GAAP reporting is mandatory, over 95% of S&P 500 companies also present non-GAAP (or "adjusted") metrics in their earnings releases, investor presentations, and conference calls.
Removing the MTM gains reduces the S&P 500's Q1 and Q2 y/y earnings growth rates from 19.0% and 35.8% to 10.6% and 22.3% (chart). Those are still very solid growth rates.
