Alphabet Should Follow the Berkshire Hathaway Playbook on Earnings
By
Andrew Bary
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Oct 29, 2026, 1:54 pm EDT

Shares of Alphabet, the Google parent, were down 12% Thursday to $283. (Ina FASSBENDER / AFP via Getty Images)
Key Points

About This Summary

Alphabet’s third-quarter earnings per share fell 26% to $2.12, largely driven by a decline in the value of its big holding in SpaceX stock.

Alphabet shares fell Thursday, reflecting an earnings miss excluding the equity impact and concerns about its search business.

Savvy investors and Wall Street analysts exclude the one-time gains in evaluating Alphabet’s results.

Alphabet
GOOGL

-12.64%

should take a page from Berkshire Hathaway’s
BRK.A

+0.68%

playbook, highlighting its quarterly operating earnings without including changes in the value of its large stock investments. These paper gains and losses can swamp Alphabet’s earnings.

During the third quarter, Alphabet’s earnings per share declined 26% year-over-year to $2.12 a share from $2.87, but that drop largely was driven by a decline in value of the company’s big holding in SpaceX
SPCX

-0.92%

stock, which fell 11% in the quarter to about $150 a share.

Alphabet’s equity investments are dominated by that $80 billion stake in SpaceX (about 550 million shares) and a sizable interest in Anthropic
ANT

0.00%

, which is set to go public in about three weeks.

Adopting the Berkshire approach would allow Alphabet to emphasize a non-GAAP operating earnings figure that excludes paper gains and losses in its large equity investments.

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Alphabet, the Google parent, did disclose in a footnote in its third-quarter earnings release late Wednesday that losses (likely entirely or almost entirely paper changes rather than realized losses) on the company’s equity holdings subtracted $8.7 billion, or 55 cents a share after taxes, from its third-quarter income.

Barron’s has estima ted the SpaceX impact at about 70 cents per share after taxes, which appeared to be partly offset by an increase in the value of the company’s Anthropic stake.

Savvy investors and Wall Street analysts exclude the one-time gains in evaluating Alphabet’s results, but retail investors unfamiliar with GAAP accounting may be confused.

Alphabet shares are down 12% Thursday to $283. That likely reflects an earnings miss excluding the equity impact, and concerns about trends in the company’s search business.

Under generally accepted accounting principles, Alphabet and other companies need to report earnings that include unrealized gains and losses on equity holdings. That rule has been in place for almost 10 years, and is controversial because it can distort reported results. This rule is only an issue for companies with large equity holdings in other corporations like Berkshire.

“This rule has been heavily criticized, but is clearly alive and well, because of its potential to impose wide swings in earnings for companies with large equity stakes,” New York tax expert Robert Willens told Barron’s in an email.

The only exception is when companies treat equity holdings under the “equity method” of accounting, normally when the stakes are more than 20%.

Equity method accounting doesn’t require that quarterly changes in the value of the stocks be reflected in the corporate owner’s earnings.

For Alphabet, the better earnings figure for the third quarter probably would be $2.67 a share, not the headline number of $2.12, to reflect the 55 cents of equity losses.

Alphabet had no immediate comment on Thursday.

In the second quarter, Alphabet realized huge paper profits on SpaceX when the company went public. Alphabet’s reported earnings were $9.11 a share in the quarter, but that included $6.26 a share in equity gains.

Alphabet also might include a warning about its reported GAAP financials like Berkshire does. Here’s what Berkshire includes each quarter—likely written by former CEO and controlling shareholder Warren Buffett.

“The amount of investment gains (losses) in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”

Write to Andrew Bary at andrew.bary@barrons.com