Corporate profits are soaring, but they aren’t all created equal. Wall Street’s earnings game is making it needlessly hard for investors to tell real growth from one‑time gains.

S&P 500 companies reported $2.64 trillion of combined net income over the last four quarters, yet a large portion came from paper gains on equity investments. Last quarter, “other income” at Amazon and Alphabet, Google’s parent company, totaled roughly $121 billion combined after taxes, almost all from investment gains.

Alphabet’s share is on track to represent about 10% of adopted‑quarter earnings for the S&P 500, and Amazon’s another 5%. Other income was 71% of Alphabet’s quarterly profits and 66% of Amazon’s. The gains stem from revaluing holdings such as Space X and Anthropic, the AI developer behind Claude.

These unrealized paper profits are nonrecurring and are part of GAAP net income, but they can distort valuation multiples. Even with them included, the S&P 500 appears expensive at about 27 times trailing earnings versus the historical average of 16.

Investors should see these windfalls as temporary and assess underlying earnings separately.