Warns circular AWS↔Anthropic relationship inflates growth and could reverse as paper losses.
Quality: Well-reasoned accounting analysis with footnote evidence; not noise, but not a full investment thesis.
Score54
Comments38
Upvote %65%
▶ Full Post Text
Everyone spent Friday celebrating Amazon's blowout quarter. Stock up 15%, AWS growing 37%, net income tripled to $62.6 billion.
Almost nobody read the footnote.
$53.4 billion of that "income" is a paper gain on Amazon's stake in Anthropic. It's right in the press release: "non-operating other income... primarily from investments in Anthropic." Amazon's actual business - every warehouse, every Prime sub, all of AWS - earned $27.5 billion.
The markup on one AI startup made Amazon twice as much as Amazon.
And here's where it gets circular... Anthropic is one of AWS's biggest customers -->
Amazon invests in Anthropic -->
Anthropic spends a chunk of it back on AWS compute. AWS accelerates to its fastest growth in 18 quarters. And on top of that, Anthropic's valuation jumps, so Amazon marks up its stake and books $53 billion of income it can't spend... It's not cash. Nobody sold anything. The number just went up!
To be fair, none of this is hidden or improper - it's mark-to-market accounting doing what it does. And it cuts both ways: if Anthropic's valuation ever drops, the same line shows up as a giant paper loss in some future quarter.
Core Amazon business earned $27.5B; $53.4B income was Anthropic mark-to-market paper gain. Reported earnings quality is lower than headline suggests, and future valuations cuts could hit income. Attractive business but distorted quarter; traders should watch for Anthropic revaluation risk. AWS growth and retail strength may continue; Anthropic valuation may keep rising or no impairment occurs.