Alphabet just recorded its most profitable quarter ever, partially due to a booming IPO market and surging in valuations for tech start-ups.
In its first-quarter earnings report, Google’s parent company revealed a net gain on equity investments of $4.75 billion that represented 22% of Alphabet’s pre-tax income. Net income shot up over 160% to $17.9 billion, topping the prior record of $15.2 billion in the fourth quarter.
In addition to its dominant position in search and a growing cloud business, Alphabet has become a prominent force in venture capital in recent years, using its hefty balance sheet to grab stakes in companies of all sizes across internet and software as well as other industries where tech is playing a growing role. The company makes a substantial investments in start-ups through GV (formerly Google Ventures), and in later-stage and pre-IPO companies through CapitalG (formerly Google Capital).
Overall, the value of certain equity securities increased $4.84 billion during the quarter, offset by a loss of $86 million on other securities and that created a net gain of $4.75 billion.
Alphabet mentioned specify in its earnings report which deals produced the gains, stating only that the figure includes “gains and losses, unrealized and realized, on equity investments that we hold.” Equity investment gains are recorded in the other income and expense (OI&E) section of its report.
The biggest single contributor was likely UiPath, the developer of automation software that had gone public earlier this month and is, currently, valued at around $40 billion. CapitalG has 30.5 million shares in UiPath, worth $2.3 billion.
Although UiPath’s IPO didn’t take place until the second quarter, the company raised a pre-IPO round at a $35 billion valuation in February, which was up from just over $10 billion in mid-2020. At that time, Alphabet’s stake was valued at $1.9 billion, based on the share price that UiPath disclosed in its prospectus.
