Executive Summary 

• Q1 earnings season has surpassed expectations, but the headline strength appears exaggerated due to six non-recurring items.

• Excluding those relatively large non-recurring items, earnings growth was still a relatively strong 18.2%.

• Earnings growth was relatively broad, with select non-recurring items contributing materially to some sectors.

• Earnings growth is expected to remain strong, with contributions to broaden beyond the Magnificent 7.

• Despite a meaningful boost from non-recurring items, underlying earnings growth remains strong and is expected to broaden.

Q1 earnings season has surpassed expectations, with strength expanding across a wider range of stocks

• Q1 earnings season is winding down, with blended earnings growth now at 28.5%, more than double the 12% estimate at the start of the quarter and the highest growth rate since Q4 2021.

• 84% of companies in the S&P 500 reported results above consensus expectations, marking the highest rate in the past eight quarters and surpassing the 5-year average of 78%.

Shown on the left is the progression of bottom-up S&P 500 earnings per share estimates on a year-over-year change basis for Q1 2026. Shown on the right are the percentages of companies within the S&P 500 that have reported earnings to date ahead of consensus expectations by quarter. The hashed bar represents results reported to date for Q1 2026. Actual results may differ materially from expectations. Past performance may not be indicative of future results. One cannot invest directly in an index. 

Excluding several large non-recurring items, earnings growth was still a relatively strong 18.2%

• The headline 28.5% growth rate is somewhat deceptive, as roughly 10 percentage points of the that growth came from one-off windfall gains at just six companies, including Alphabet, Amazon, Meta, GE Vernova, Netflix, and Ford.

• Excluding these items, S&P 500 earnings growth falls to 18.2%, still well above the 12.1% pre-season projection and a sign that underlying profitability remains solid even if the headline figure overstates overall earnings strength.

Shown are projections for Q1 2026 earnings growth for the S&P 500 on a year-over-year basis. Pre-Season Projection refers to bottom-up consensus estimates as of 3/31/2026. Latest Estimate refers to the blended estimate, which combines actual results for companies that have reported with bottom-up consensus estimates for those that have not. Adjusted Estimate revises the Latest Estimate figure to account for a select number of non-recurring company-specific factors. References to individual companies or securities should not be interpreted as a recommendation to buy, hold, or sell. Actual results may differ materially from projections. One cannot invest directly in an index.

Earnings growth was relatively broad, with select non-recurring items contributing materially to some sectors

• The non-recurring items at those six companies significantly boosted earnings growth across several sectors, especially in Communication Services, where one-time gains at Alphabet, Meta, and Netflix lifted the sector from negative recurring growth to the top performer of the quarter.

• Consumer Discretionary and Industrials also benefited from non-recurring items, while Information Technology and Materials led on recurring earnings strength alone, pointing to solid underlying breadth even after adjustments.

Data shown are blended growth rates in earnings per share for the S&P 500 and its eleven constituent sectors for Q1 2026 on a year-over-year percent change basis. Blended growth combines actual results with consensus expectations for companies yet to report. Light green bars reflect the estimated contribution of six non-recurring items at Alphabet, Amazon, Meta, GE Vernova, Netflix, and Ford to sector-level earnings growth. The S&P 500 is a market capitalization-weighted index of large-cap U.S. stocks. Actual results may differ materially from expectations. Past performance may not be indicative of future results. One cannot invest directly in an index.

Earnings growth contributions are expected to broaden beyond the Magnificent 7

• The Magnificent 7 accounted for more than half of Q1 earnings growth as reported. However, excluding the six largest non-recurring items shows the rest of the S&P 500 contributing a much larger share, suggesting growth has broadened meaningfully beneath the surface.

• Consensus estimates show this trend is expected to continue through 2027, with the Magnificent 7 driving a smaller share of earnings growth as fundamentals improve beyond mega cap stocks.