Alphabet's Stock Slipped 2.2% After Sundar Pichai's Earnings Beat Was Inflated by a $77.1 Billion Unrealized Gain on Equity Holdings. Should Investors Discount That Gain When Judging the Real Growth Story?

Axe Cap view

Alphabet’s Earnings Boost Hides Volatile Unrealized Gains

Alphabet’s Q2 beat was propped by a $77 billion paper gain, masking the real story.

Alphabet reported a $41 billion profit in Q2, but that was heavily inflated by $77.1 billion in unrealized gains from investments outside their core business. These are gains on paper only — they haven’t cashed out those profits. While accounting rules allow this, it paints a misleading picture of true business performance. The company warns these gains could flip negative quickly, which means the headline profits aren’t reliable for judging growth. For South African investors, that signals caution. Tech-heavy exposure through the rand may look tempting on the surface with a weaker USD/ZAR, but Alphabet’s earnings volatility adds risk. This also reminds us why banks like Standard Bank or FirstRand, tied to actual loans and fees, might offer steadier stories locally. If you’re after growth in JSE tech-linked stocks, waiting for clearer earnings might be smarter. There’s a chance the unrealized gains hold or even grow, but given their volatile nature, it’s better to be skeptical. this is just our opinion and not financial advice