Executive Summary 

• S&P 500 earnings posted a seventh straight quarter of double-digit growth, led by energy and communications.

• Historically, it has been unusual to see earnings growth this strong outside of recession recoveries.

• Two companies drove much of the earnings acceleration, but broader results were still robust.

• Strong 2026 earnings growth raises the bar for 2027, yet forecasts still call for double-digit gains.

• Despite a significant boost from a handful of non-recurring items, underlying earnings growth and future expectations remain robust. 

S&P 500 earnings posted a seventh straight quarter of double-digit growth, led by energy and communications

Shown are the blended year-over-year growth rates in earnings per share for the S&P 500 on the left and its eleven constituent sectors for Q2 2026 on the right. Blended growth rates combine actual results with consensus expectations for companies that have yet to report. The S&P 500 is a market capitalization weighted index of large cap stocks in the U.S. Past performance may not be indicative of future results. Actual results may differ materially from expectations. One cannot invest directly in an index.

• With ~96% of companies in the S&P 500 reporting, earnings appear to be settling into a more than 50% growth rate in Q2 2026 on a year-over-year basis. This would be the strongest growth pace for the index since Q2 2021 and its seventh consecutive quarter of double-digit growth.

• Earnings growth has been particularly broad-based, with 10 of 11 sectors reporting positive year-over-year growth, led by energy, communications, and consumer discretionary. 

Historically, it has been unusual to see earnings growth this strong outside of recession recoveries

Shown is the quarterly earnings per share growth rate on a year-over-year percent change basis of earnings for the S&P 500. Solid bars represent actual results, and hashed bars represent projections based on bottom-up equity analysts’ estimates. Shaded regions represent U.S. recessions. The S&P 500 is a market capitalization-weighted index of large cap U.S. stocks. Past performance may not be indicative of future results. Actual results may differ materially from expectations. One cannot invest directly in an index.

• Earnings growth of this magnitude is an unusual mid-cycle phenomenon. It is more common to see as the economy emerges from recessions, when depressed fundamentals create an easy comparison base for the subsequent recovery.

• The Tax Cuts & Jobs Act helped drive a similar earnings surge in 2018, demonstrating how significant fiscal policy changes can boost corporate profitability even outside a recession.

• The projected Q2 2026 earnings growth rate may represent another such episode, as fiscal stimulus from the One Big Beautiful Bill Act could be supporting earnings growth. 

Two companies drove much of the earnings acceleration, but broader results were still robust

Shown on the left is the progression of S&P 500 earnings per share estimates on a year-over-year change basis for Q2 2026. Shown on the right are year-over-year S&P 500 earnings growth, earnings surprise relative to consensus expectations, and net profit margins for companies reporting second quarter results. Blue bars reflect reported results, while green bars exclude Alphabet's and Amazon’s reported investment gains on SpaceX and Anthropic to illustrate the influence of those companies on aggregate results. 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. References to individual securities should not be construed as a recommendation to buy, hold, or sell.

• Much of the late-quarter increase in earnings expectations occurred after Alphabet and Amazon reported, with projected Q2 S&P 500 earnings growth rising to about 35% after Alphabet's results and nearly 50% after Amazon’s.

• However, much of that growth was attributable to non-recurring factors, such as mark-ups in these companies’ stakes in SpaceX and Anthropic.

• Even after excluding these effects, S&P 500 earnings growth remained a robust 32%, with strong earnings surprises and profit margins underscoring the strength of underlying corporate earnings. 

Strong 2026 earnings growth raises the bar for 2027, yet forecasts still call for double-digit gains

Shown are the progression of consensus analyst estimates for S&P 500 earnings per share growth (left) and earnings per share in dollar terms (right) for full year 2026 in blue and full year 2027 in green. Estimates are based on analyst expectations and are subject to change. Actual results may differ materially from expectations. One cannot invest directly in an index.

• Analysts have continued raising full year 2026 earnings estimates following stronger-than-expected results, pushing expected S&P 500 earnings growth above 30%.

• 2027 earnings growth estimates have drifted lower, partly in recognition that some of the factors driving earnings growth this year are unlikely to persist. But 13% earnings growth for next year would still sit well above historical averages.

• Looking beyond the growth rate, 2027 earnings estimates have continued to climb in dollar terms and now exceed $400 per share after starting the year under $360, highlighting the strength of the underlying earnings outlook.