Alphabet's Reported $112 Billion Profit Included a $94 Billion Paper Gain From SpaceX. Here's What the Company Actually Earned.
During the second quarter, Alphabet reported 300% growth in net income.
Overview
Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) long-running bet on Space Exploration Technologies (NASDAQ: SPCX) has quietly become one of the most consequential corporate investments in modern history. What began as a shared interest in satellite connectivity has now become a windfall that dominates Alphabet's financial profile. The analysis below details the power of deploying patient capital and the distortions that unrealized gains can introduce into reported profits.
Image source: Getty Images.
In 2015, Google invested $900 million into SpaceX. At the time, the rocket company was valued at roughly $12 billion, so the investment secured Google an ownership stake of approximately 7.5%. The capital was used to support SpaceX's ambitions in reusable launch cadences and its nascent Starlink constellation. These areas aligned with Google's own interest in global internet access.
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Originally published at www.fool.com.