S&P 500 companies post strongest earnings growth in five years

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S&P 500 earnings growth

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S&P 500 second-quarter earnings show strongest growth in five years, with nearly 90% of companies beating forecasts and eight sectors posting double-digit profit gains.
ExxonMobil and Chevron report combined Q2 earnings of $26.5bn, Google net income quadruples to $112bn, and Amazon profit more than triples on cloud computing sales.
Despite cost pressures and divergent consumer sentiment, broad-based sector strength and resilient spending drive S&P 500 up 9.4% year to date, with corporate profits at a record $4.4tn.

Second-quarter earnings strength broadens across sectors

As reported by Financial Times, citing FactSet, nearly nine out of 10 companies in the S&P 500 are beating consensus earnings forecasts, with eight of the index's 11 sectors delivering double-digit profit growth. The figures are based on results from more than 300 companies and analyst estimates for those yet to report.

Market strategists say the strength is no longer confined to a narrow group of technology names. Hugh Gimber, global market strategist at JPMorgan Asset Management, says the results are "rock solid" and describes recent weeks as highly positive for corporate reporting, with healthy performance spreading across a broader mix of industries.

Energy groups are benefiting from higher fuel prices, with ExxonMobil and Chevron reporting combined second-quarter earnings of $26.5bn on Friday. Communications services and information technology companies are also producing large gains, including Google, whose net income quadruples to $112bn with support from investment gains, and Amazon, whose profit rises more than threefold on cloud-computing sales.

Strong corporate updates are helping support equities even after doubts over the durability of the AI boom trigger a sell-off in technology shares. The S&P 500 is up 9.4 per cent year to date, and investors say broader sector participation is important for sustaining the market's advance beyond a handful of dominant companies.

Consumer pressure and policy costs shape the outlook

The earnings season is unfolding against a backdrop of financial strain for many U.S. consumers. The April-to-June period includes average petrol prices above $4 a gallon, rising corporate borrowing costs after a global bond sell-off, and consumer sentiment falling to record lows.

Strategists say resilient spending and the wider economic effects of heavy AI infrastructure investment are helping keep profits elevated outside the technology sector. The first quarter already sets a high base, with Bureau of Economic Analysis data showing corporate profits at a record $4.4tn, while the Federal Reserve Bank of Richmond says profits account for 13.9 per cent of U.S. economic output, the highest share on record.

At the same time, executives are drawing a contrast between wealthier households that continue spending and lower-income consumers facing tighter finances. Joe Brusuelas of RSM says the wealth effect is strengthening because households that own assets benefit from the stock market, while Procter & Gamble finance chief Andre Schulten says lower-income shoppers are managing pay cheque to pay cheque.

Some companies still report durable demand despite cost pressures. Chipotle Mexican Grill says its cost of sales rises faster than menu prices because of higher beef and freight costs, yet net income still grows about 12 per cent in the quarter, while JPMorgan Chase finance chief Jeremy Barnum says spending remains robust across income segments. Banks including JPMorgan, Goldman Sachs, Citigroup and Bank of America are also lifting profits through strong equities trading tied to AI stock activity, and defence contractors including Lockheed Martin, General Dynamics, L3Harris and RTX are reporting higher second-quarter net profit as U.S. defence spending increases.

Our earlier coverage of the early-August market setup looked at how a packed calendar of U.S. labor-market releases and key company reports could influence expectations for Federal Reserve policy and sector leadership. We highlighted investors’ focus on results from Qnity Electronics, DuPont, Eli Lilly, and Honeywell Aerospace, alongside the July jobs report as a potential trigger for shifting September rate expectations.

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