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Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) took an $8.7 billion paper loss on its investment portfolio in the third quarter, with Space Exploration Technologies Corp.‘s (NASDAQ:SPCX) falling share price doing most of the damage. The hit reduced earnings by 55 cents per share, accounting for roughly 61% of the 90-cent earnings miss — and continued declines in SpaceX stock suggests the accounting pain could continue into the current quarter.

Alphabet Chief Financial Officer Anat Ashkenazi addressed the loss during the company’s third quarter earnings call.

"Other income and expenses was negative $8.2 billion, due primarily to unrealized loss from our investment in SpaceX from a decline in its stock price in the third quarter," Ashkenazi said.

The distinction matters: Alphabet’s $8.7 billion portfolio loss and its $8.2 billion net expense in other income and expenses are different measures. Both underscore how movements in private and other investment holdings can affect reported earnings, even when the underlying businesses continue operating.

SpaceX’s Slide Packs a Billion-Dollar Blow

Alphabet invested approximately $900 million in SpaceX in 2015 and reported holding roughly 551 million shares at midyear. On June 30, Alphabet valued its stake at $94.1 billion, implying a share price of approximately $171.

SpaceX shares ended September at $150.86, a decline of nearly 12% from that reference price. Applying the decline to Alphabet’s midyear holding implies a roughly $10.9 billion pre-tax loss from SpaceX alone, based on an estimate rather than a company disclosure.

The estimate exceeds Alphabet’s reported $8.7 billion net portfolio loss, suggesting gains elsewhere in the investment portfolio may have offset part of the SpaceX hit.

The exposure is substantial: every $10 move in SpaceX’s share price changes the estimated pre-tax value of Alphabet’s holding by approximately $5.5 billion.

Alphabet’s Next Quarter Could Bring More Volatility

The loss is unrealized, meaning Alphabet has not sold the shares to crystallize the decline. Its investment is marked to market each quarter, so a recovery in SpaceX’s share price could reverse some of the accounting damage.

The opposite is also true. SpaceX stock has fallen further in the fourth quarter, declining 3.7% so far in October. Based on Alphabet’s estimated holding, that implies roughly $3.1 billion in additional paper losses so far this quarter, although the figure could change before Dec. 31.

That volatility creates an unusual complication for investors assessing Alphabet’s earnings: results can swing materially because of an investment in a separate private company, independently of Google’s advertising and cloud performance.

SpaceX’s decline explains a significant portion of Alphabet’s earnings shortfall, but the loss is not an operating cash outflow. Investors should watch SpaceX’s valuation alongside Google’s core business, recognizing that any further paper losses — or a recovery — could meaningfully affect reported profits.

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