From Ritu Raj | Product & Market Analysis
Amazon's Anthropic Gain Was 62% of Q2 Pre-Tax Income: The 10-Q, Line by Line
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Amazon reported $62.6 billion of net income for the second quarter of 2026. Its 10-Q shows that $50.5 billion of pre-tax income came from one line: upward adjustments to private company stock, primarily its nonvoting preferred shares in Anthropic. That is 62% of the quarter's $80.9 billion pre-tax income. Amazon's operating income, the profit from selling things, was $27.5 billion.
Key takeaways
- Amazon's Anthropic gain was the majority of Q2 2026 pre-tax income. Upward adjustments of $50.5 billion, primarily Anthropic preferred stock, made up 62% of $80.9 billion pre-tax income, per Amazon's 10-Q.
- Net income ran at 2.3 times operating income in Q2 2026. Amazon earned $27.5 billion from operations and reported $62.6 billion of net income, because $53.4 billion of non-operating income sat between the two lines.
- Only about half of the Anthropic markup reached the income statement. Amazon's Anthropic convertible notes rose $55.7 billion in fair value in Q2 2026, and that gain went to other comprehensive income instead of net income.
- The gain is not cash and not repeatable on schedule. It exists because Anthropic raised money at a higher price. Amazon's trailing free cash flow at 30 June 2026 was an outflow of $7.6 billion.
Short answer. In Q2 2026, about 62% of Amazon's pre-tax income came from marking up its Anthropic preferred stock after Anthropic's financing rounds. Across the first half of 2026, Anthropic-linked gains were about 56% of pre-tax income. None of it is revenue or cash. It is an accounting revaluation of a private stake, required under US GAAP when an observable transaction price appears.
Amazon's net income split: operating profit versus the Anthropic gain
Skip the earnings per share line. The fastest way to see the Amazon Anthropic investment gain is to read the income statement from the top. Operating income is what the retail, advertising and AWS businesses earned after their costs. Non-operating income is everything below that line: interest, currency moves and investment revaluations.
In a normal quarter, the non-operating section is a rounding difference for Amazon. In Q2 2025 it was $1.7 billion against $19.2 billion of operating income. In Q2 2026 it was $53.4 billion against $27.5 billion. The table below sets four periods side by side, using the filed figures in millions.
| Line | Q2 2025 | Q1 2026 | Q2 2026 | H1 2026 |
|---|---|---|---|---|
| Operating income | 19,171 | 23,852 | 27,461 | 51,313 |
| Other income (expense), net | 1,117 | 15,647 | 53,415 | 69,062 |
| Total non-operating income | 1,686 | 15,982 | 53,396 | 69,378 |
| Income before income taxes | 20,857 | 39,834 | 80,857 | 120,691 |
| Provision for income taxes | (2,678) | (9,560) | (18,199) | (27,759) |
| Net income | 18,164 | 30,255 | 62,647 | 92,902 |
| Anthropic-linked gains (see note) | 71 | 16,807 | 50,486 | 67,293 |
| Anthropic-linked share of pre-tax income | 0.3% | 42.2% | 62.4% | 55.8% |
Source: Amazon 10-Q filings for Q1 and Q2 2026. Anthropic-linked gains are the "upward adjustments relating to equity investments in private companies" plus "reclassification adjustments for AFS debt securities" (the gain booked when notes convert to preferred stock). The filing says the upward adjustments are primarily Anthropic, not wholly. The last two rows are Zan Digital calculations.
Why pre-tax is the clean comparison
Pre-tax income is the last line where the gain and the operating profit sit side by side before tax muddies them. Amazon does not disclose the tax charged on the Anthropic gain as a single quarterly figure in the lines we could verify. So the 62% figure uses pre-tax numbers on both sides of the ratio, which keeps the calculation honest.
If you want a net income share, you need a tax assumption. At the 21% US federal statutory rate, a $50.5 billion pre-tax gain is about $39.9 billion after tax, or 64% of Q2 net income. At Amazon's own Q2 effective rate of 22.5%, it is about $39.1 billion, or 62%. Either way, the answer rounds to roughly three fifths.
How a private Anthropic round becomes Amazon net income
Amazon does not hold Anthropic shares that trade on a stock exchange. So how does a private company's valuation reach a public company's earnings? The answer is a specific US GAAP rule for equity stakes that have no market price.
Under the accounting standard for equity securities, ASC 321, a company can carry a private stake at cost and adjust it only when an observable price appears. An observable price means an orderly transaction in the same or a similar security of the same issuer. A new funding round is exactly that kind of transaction.
The round is the trigger
Anthropic raised money twice in the first half of 2026. The Series G valued it at $380 billion in February. The Series H, announced 28 May 2026, raised $65 billion at a $965 billion post-money valuation, according to Orrick's announcement of the deal. That is a 2.5 times step-up in about three months.
Amazon's 10-Q says its Q2 upward adjustments "reflect observable changes in prices, primarily from our nonvoting preferred stock in Anthropic". When new investors paid a higher price, Amazon was required to write its own preferred stock up toward that price. The gain went straight into "Other income (expense), net."
Amazon helped set the price it marked to
This is the part that deserves more attention than it gets. Amazon was itself a buyer in the rounds that set the observable price. The 10-Q discloses $5.0 billion of Series G preferred stock and $5.0 billion of Series H preferred stock bought from Anthropic in Q2 2026.
That does not make the markup improper. Other investors led the Series H, and the price was not Amazon's alone to set. But it does mean the investor booking the gain also helped fund the event that produced it. The wider web of such deals is mapped in the breakdown of how the AI circular deals actually work, and Amazon's Q2 numbers are the clearest income statement example of it so far.
The investment is not a passive financial holding. In the same 10-Q, Amazon notes that AWS and Anthropic expanded their multi-year commitment "by more than $100.0 billion over 10.0 years" in Q2 2026. Amazon is Anthropic's investor, its cloud supplier and, through that commitment, a recipient of its spending. A reader should hold all three roles in mind when judging the gain.
The Anthropic roll-forward: $18 billion in, $190 billion on the books
The 10-Q gives enough disclosure to reconcile the preferred stock balance across the quarter. We ran that reconciliation ourselves. It closes to the dollar using the filed figures, which is a good sign the disclosure is internally consistent.
| Item | Amount | Source in the 10-Q |
|---|---|---|
| Preferred stock at 31 March 2026 | 32.0 | Q1 10-Q, Note 2 |
| Add: Series G purchase in Q2 | 5.0 | Q2 10-Q, Note 2 |
| Add: Series H purchase in Q2 | 5.0 | Q2 10-Q, Note 2 |
| Add: upward adjustments in Q2 | 50.5 | Q2 10-Q, Notes 1 and 2 |
| Preferred stock at 30 June 2026 | 92.5 | Q2 10-Q, Note 2 |
| Convertible notes at fair value, 30 June 2026 | 97.9 | Q2 10-Q, Note 2 |
| Total Anthropic carrying value, 30 June 2026 | 190.4 | Zan Digital sum of the two lines above |
32.0 + 5.0 + 5.0 + 50.5 = 92.5, matching the filed balance. The roll-forward assumes no further conversion of notes in Q2 2026; the filing mentions conversions only in Q1 2025 and Q1 2026.
What Amazon actually paid
Against that $190.4 billion, Amazon's disclosed cash into Anthropic is $8.0 billion of convertible notes bought between Q3 2023 and Q4 2025. Add the $10.0 billion of preferred stock bought in Q2 2026. That is $18.0 billion invested against $190.4 billion carried, a multiple of about 10.6 times.
The Q2 purchases sit inside a larger arrangement. The filing describes a facility of up to $20.0 billion that Amazon made available to Anthropic, reduced to $15.0 billion after the Series H purchase. Further investment from that facility at a higher price would trigger the same markup mechanics again.
Two accounting buckets for one Anthropic stake
Here is the detail most coverage of the Amazon Anthropic gain missed. Amazon holds Anthropic in two different instruments, and they are accounted for in two different places. Only one of them flows through net income.
The nonvoting preferred stock is an equity investment, so its upward adjustments go to the income statement. The convertible notes are classified as available-for-sale debt securities. Their fair value changes go to accumulated other comprehensive income, a balance sheet equity account that bypasses net income entirely.
The Q2 markup was roughly $106 billion, not $50 billion
The notes' fair value rose from $42.2 billion at 31 March to $97.9 billion at 30 June 2026. The associated unrealised gain in other comprehensive income rose from $36.3 billion to $92.0 billion. That is a further $55.7 billion of Anthropic gain in one quarter that never touched net income.
Add the $50.5 billion of income statement markup and the combined pre-tax revaluation is about $106 billion. Roughly 48% of it reached reported earnings. The remaining 52% sits in equity, waiting for a conversion or sale to move it into the income statement.
Why the conversion line matters
When notes convert to preferred stock, the gain already sitting in other comprehensive income is reclassified into net income. Amazon booked $4.5 billion of such reclassification gains in the first half of 2026, all in Q1. That is why Q1 2026's Anthropic-linked figure is $16.8 billion, combining a $12.3 billion markup and the $4.5 billion conversion gain.
I would treat the $92.0 billion of unrealised note gains as a future earnings event waiting for a trigger. Any further conversion moves a slice of it into reported profit, without anything changing at Anthropic that day.
Tax, cash and what the Anthropic gain is not
Amazon's Q2 2026 tax provision was $18.2 billion, against $2.7 billion a year earlier. The effective rate rose from 12.8% to 22.5% on pre-tax income. Amazon's Q1 2026 10-Q attributes part of that quarter's provision to discrete tax expense on the Anthropic gains, so the markup is taxed in the accounts even though no shares were sold.
A provision is not the same as a tax payment. Tax on an unrealised gain is typically recorded as a deferred liability, due only when the gain is realised. The filing's tax note would show the split, and we could not retrieve that note in full for this post.
No cash came in
The gain added nothing to Amazon's bank account. The cash flow statement reverses non-cash gains when it builds operating cash flow from net income. Amazon reported trailing operating cash flow of $161.4 billion and free cash flow of minus $7.6 billion at 30 June 2026. The free cash flow figure turned negative because property and equipment purchases rose $66.1 billion year on year.
Set those side by side and the contrast is stark. Amazon reported its highest quarterly net income on record in the same twelve month window that it consumed more cash than it generated after capital spending. How that capex compares to operating cash flow across the other hyperscalers is laid out in the analysis of hyperscaler capex against operating cash flow.
The gain is also not AWS revenue, and it is not evidence that the AWS and Anthropic partnership is profitable. AWS earned $16.6 billion of operating income in Q2 2026 on $42.2 billion of sales, per the Q2 release coverage. That is the line that tells you how the cloud business is doing. The Anthropic mark tells you what other investors paid for Anthropic shares.
Where this analysis of the Anthropic gain is weakest
Three limits apply to every number above, and they cut in different directions.
First, the filing says the upward adjustments are "primarily" Anthropic, not wholly. The same 10-Q notes that Amazon's private equity holdings also include preferred stock in OpenAI. If part of the $50.5 billion relates to OpenAI or another company, the true Anthropic share is below 62%. The filing does not split it, so neither can we.
Second, the markup is not a fiction. The case for it is strong. A $65 billion round led by outside investors is about as good an observable price as a private company can produce. Anthropic's revenue growth, covered in the piece on Anthropic's enterprise revenue ahead of its IPO, gives the price some fundamental support. Calling the gain "fake profit" goes too far. It is a real change in the value of an asset Amazon owns.
Third, our tax adjusted figures are illustrations. The 62% to 64% net income share depends on an assumed rate. Amazon's actual tax on this specific gain may differ, especially once deferred tax and any state taxes are considered. The pre-tax 62% is the only share we would quote without a caveat.
The fair reading is narrow. The gain is real value. It is just not operating performance, not cash and not something that repeats on a schedule. Treating it as any of those three is where analysis goes wrong.
What changes for the Amazon Anthropic gain in Q3 and after an IPO
Amazon reports Q3 2026 results on 29 October 2026. Its guidance calls for operating income of $22.5 billion to $26.5 billion. Whether net income lands anywhere near Q2 depends almost entirely on whether a new observable price appeared in the quarter.
No new round means no new markup
Under the measurement approach Amazon uses for the preferred stock, the carrying value moves only on an observable transaction or an impairment. If Anthropic sold no new preferred stock in Q3, the preferred line should show no upward adjustment. Net income would then fall back toward operating income plus normal non-operating items.
A listing changes the rules entirely
Once Anthropic shares trade publicly, Amazon's equity stake would have a readily determinable fair value. Equity securities with a market price are marked to that price through net income every quarter, under the same ASC 321 standard. The gain would stop arriving in large one-off steps and start arriving as quarterly volatility in both directions.
That is a bigger change than most readers expect. A 10% move in Anthropic's share price on a stake carried near $190 billion would swing Amazon's pre-tax income by roughly $19 billion, if the whole position were marked through income. The preferred stock and notes would need to convert first, and the terms of conversion matter. How preference terms behave at a listing is covered in the post on liquidation preferences and IPO ratchets.
| Event | Effect on net income | Effect on other comprehensive income |
|---|---|---|
| No new Anthropic round | No upward adjustment on preferred stock | Notes still marked to fair value each quarter |
| New private round at a higher price | Upward adjustment, as in Q1 and Q2 2026 | Notes revalued upward |
| Notes convert to preferred stock | Accumulated note gain reclassified into income | Balance falls by the reclassified amount |
| Anthropic lists publicly | Stake marked to share price every quarter, up or down | Depends on whether notes convert before or at listing |
How to read Amazon's next print without the Anthropic noise
Our view is that operating income is the only line in Amazon's results that a business buyer should anchor on until Anthropic's status settles. I would read three numbers, in this order, before looking at earnings per share.
Start with operating income against the guidance range. Then read "Other income (expense), net" and the note that breaks it down. Finally read the cash flow statement for operating cash flow and capital spending. That sequence separates what Amazon earned, what it was marked to, and what it actually collected.
The same discipline applies to any company with a large private AI stake. Other filings that mix operating results with AI investment marks are compared in the ranking of AI revenue disclosure metrics. And the other side of this exact trade, how the same instruments appear as a charge in Anthropic's own accounts, is reconciled in the Anthropic S-1 loss reconciliation.
One more thing is worth stating plainly. A rising Anthropic valuation also raises the stakes of the AWS commitment running the other way. If Anthropic's growth slows, both the mark and the cloud revenue tied to it come under pressure together. That correlation is the real risk inside Amazon's Q2 headline, and it is not visible in the net income figure at all.
Frequently asked questions
How much did Amazon gain on its Anthropic investment in 2026?
Amazon's 10-Q filings show Anthropic-linked pre-tax gains of about $67.3 billion in its income statement for the first half of 2026. That is $16.8 billion in Q1 and $50.5 billion in Q2, the latter described as primarily Anthropic. A further $55.7 billion of unrealised gain on Anthropic convertible notes went to other comprehensive income in Q2 2026, outside net income.
What percentage of Amazon's net income came from Anthropic?
On a pre-tax basis, upward adjustments primarily from Anthropic were 62% of Amazon's Q2 2026 pre-tax income of $80.9 billion. Applying a 21% tax rate gives roughly 64% of the $62.6 billion net income. At Amazon's own Q2 effective rate of 22.5%, the share is about 62%. The exact after-tax figure is not disclosed as one number.
Why does Amazon report gains on Anthropic if it has not sold any shares?
US accounting rules for equity stakes without a market price let a holder carry them at cost, then adjust when an observable price appears in a similar security. Anthropic's 2026 funding rounds were observable prices. Amazon was required to mark its nonvoting preferred stock up toward those prices and record the change in other income, even though no shares were sold.
Is Amazon's Anthropic gain included in operating income?
No. The gain sits in "Other income (expense), net," which is below operating income on Amazon's income statement. Amazon's Q2 2026 operating income of $27.5 billion excludes it entirely. That is why operating income is the better guide to how Amazon's retail, advertising and AWS businesses performed, and why net income ran at 2.3 times operating income in the quarter.
What happens to Amazon's Anthropic stake if Anthropic goes public?
Once Anthropic shares trade, any Amazon holding of those shares has a readily determinable fair value. Equity securities with a market price are marked to that price through net income every quarter. The gains would arrive as quarterly swings in both directions rather than occasional large steps. Conversion terms for the notes and preferred stock decide how much of the stake is affected.
How much has Amazon invested in Anthropic in total?
Amazon's Q2 2026 10-Q discloses $8.0 billion of convertible notes bought from Q3 2023 to Q4 2025, plus $5.0 billion of Series G and $5.0 billion of Series H preferred stock bought in Q2 2026. That is $18.0 billion in total. At 30 June 2026 the notes and preferred stock were carried at about $190.4 billion combined.
Where to start before 29 October
Download Amazon's Q2 2026 10-Q from EDGAR and find Note 1, the table headed "Other income (expense), net". Copy the "upward adjustments" line into a spreadsheet next to operating income for the last four quarters. When the Q3 filing lands, add one column. You will have a cleaner read of Amazon's earnings than most headlines will give you on results day.
If you hold or evaluate any company with a private AI stake, run the same check on its last filing. Find the gain line, divide it by pre-tax income, and decide whether you are looking at a business or a portfolio.
The other side of the trade
Amazon's gain is Anthropic's charge. The mirror image of these instruments in Anthropic's own filing is set out in the Anthropic S-1 loss reconciliation.
References
- Amazon.com, Inc., Form 10-Q for the quarter ended 30 June 2026, filed 31 July 2026. Used for the income statement, Note 1 other income table, and Note 2 Anthropic disclosures.
- Amazon.com, Inc., Form 10-Q for the quarter ended 31 March 2026, filed 30 April 2026. Used for Q1 figures and 31 March balances.
- Amazon, Amazon.com Announces Second Quarter Results, 30 July 2026. Used for cash flow figures and Q3 guidance.
- Orrick, Anthropic Raises $65B Series H at $965B Post-Money Valuation, May 2026. Used for the Series H terms.
- The Next Web, Amazon's best quarter in years was half-built on a $16.8 billion paper gain from Anthropic, 3 May 2026. Used to cross-check the Q1 2026 gain.
- Amazon, Amazon will share its Q3 2026 earnings on October 29, October 2026. Used for the results date.
Weakest point in the source base: Amazon describes the upward adjustments as primarily, not wholly, Anthropic, and we could not retrieve the full Q2 income tax note, so the after-tax share is an estimate. The Series G valuation of $380 billion comes from secondary reporting. Figures retrieved 26 October 2026; re-verify after the Q3 10-Q is filed.
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