S&P 500 heads for strongest profit growth in five years

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S&P 500 heads for strongest profit growth

Growth moves beyond AI

Large technology companies remain the main source of earnings growth. Nvidia, Apple and Microsoft continue to have a major influence on the index’s performance, while AI-related companies are seen by analysts as one reason why S&P 500 earnings growth could exceed 20% in 2026.

Nvidia has again become the central part of this story. Its results and guidance beat Wall Street expectations, prompting analysts to raise earnings estimates. The company’s adjusted profit is now expected to rise by about 84% this year, compared with a forecast of 64% at the beginning of the year.

Apple also gave the market a positive signal: its third-quarter guidance came in above expectations. Alphabet’s results helped ease concerns that artificial intelligence could undermine the company’s core search business as it integrates AI into its services.

Energy, materials and industrials strengthen the index

Energy has been one of the biggest sources of upward earnings revisions. Against the backdrop of the war with Iran and rising oil prices, expected earnings growth for energy companies this year was raised to 61%, compared with 7.6% at the start of the year.

Exxon Mobil and Chevron reported first-quarter results above expectations: higher oil and natural gas prices offset production disruptions linked to military risks. Together with ConocoPhillips, these companies remain the sector’s main drivers and account for a significant share of the energy subindex.

The materials sector has also become an important source of positive surprises. Rising prices and constrained supply have supported materials producers. Sherwin-Williams, PPG Industries and Axalta Coating Systems expect cost inflation but are counting on moderate sales-volume growth in the second half of the year. Dow is taking a cautious approach and is ready to raise prices only if market conditions improve further.

Industrial gas producers, including Air Products and Chemicals and Linde, may receive support from tightness in the global helium market after supply cuts from Qatar.

Consumer signals remain mixed

The communications, media and entertainment sector, as well as consumer durables, also showed notable improvements in forecasts after the first quarter. Walt Disney eased some concerns about demand at its theme parks, while Warner Bros. Discovery delivered stronger results in its studio and streaming businesses.

However, the consumer picture remains uneven. McDonald’s and Whirlpool warned of weakening consumer sentiment and tighter household budget planning. Full-year earnings forecasts for both companies were revised lower.

A broader base for the rally

The main conclusion from the current earnings season is that S&P 500 profit growth is becoming more balanced. If technology companies continue to deliver strong results, while energy, materials and industrials maintain improving forecasts, 2026 may look more like the post-pandemic earnings boom of 2021 than a late-cycle slowdown.

At the same time, the market remains vulnerable. Higher oil prices support energy companies, but they also increase pressure on consumers and businesses with high costs. As a result, the future direction of the S&P 500 will depend on whether the broader corporate sector can sustain earnings growth, not only on Nvidia and other AI leaders.

In an earlier report, we noted that stocks rising as the dollar nears a six-week high on Iran uncertainty.

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