Alphabet and Amazon trade below the S&P 500 on price-to-earnings, and the gap may be more accounting math than valuation comfort

Alphabet and Amazon are showing up as “cheaper” than the S&P 500 when investors look at the price-to-earnings ratio, according to a Yahoo Finance market piece published August 23. The comparison is based on the basic idea that P/E divides a company’s stock price by its earnings, so a lower P/E can announcement the market is paying less for each dollar of profit.

That headline result, however, comes with a caveat. The article points to “oddities” tied to how P/E is calculated and interpreted, implying that the metric’s simplicity can mask changes in reported earnings, the mix of profits across segments, and how investors and analysts model future results.

For large technology companies, earnings can swing for reasons that do not necessarily translate into durable changes in business performance. In practice, P/E can move when earnings rise or fall due to timing effects, one-time items, and shifts in the pace of costs or investment. It can also appear low if trailing earnings used in the ratio are temporarily elevated, or if forward earnings expectations are changing faster than the stock price.

The analysis places special focus on Alphabet and Amazon, two firms whose results depend heavily on business cycles across advertising for Alphabet and e-commerce and cloud for Amazon. Both companies also face ongoing investment decisions, including spending on infrastructure, computing demand, and product development, which can influence earnings patterns even when revenue growth continues.

While Yahoo Finance’s framing centers on valuation optics, Amazon’s own public communications emphasize how its business is organized around multiple engines, including retail and third-party seller services, advertising, and AWS (Amazon Web Services). AWS is a major driver of profit stability for Amazon when cloud demand is strong, but earnings can still be affected by cost and capacity decisions that do not immediately show up in revenue.

Beyond the companies themselves, the S&P 500 is a broad index that includes firms with different profit characteristics and accounting dynamics than high-growth technology platforms. That matters because P/E is not a universal “business quality” measure. It is a comparative snapshot that can be distorted when the constituents of each comparison group are moving through different phases of earnings volatility.

For now, the key missing piece is the specific set of “oddities” the Yahoo Finance article cites. Without additional disclosed figures, it is not possible to say whether the low P/E readings stem more from trailing earnings quirks, analyst forward-expectation adjustments, or specific accounting items that affect reported profitability.

Investors will likely watch whether the valuation gap persists as earnings reports update the denominator in P/E calculations. The next indicates will be changes in reported profitability, any guidance language on cost control and demand, and how analysts revise earnings expectations for both companies relative to the broader market.