A U.S. equity earnings revision report that aggregates data from several institutions says S&P 500 earnings per share are now about 14% above a trend channel derived from more than 90 years of history. According to the article, that is the first time since 1955 that earnings have reached such a large deviation above the long-run trend.
The report also says the share of companies beating profit estimates, the magnitude of sales beats, and analyst upward earnings revisions are all sitting at historically strong levels. In the article’s framing, that helps explain why elevated U.S. stock valuations have continued to find support: earnings growth is not just holding up, analysts are still lifting their forward expectations.
Earnings are no longer just a valuation story
The article says the market’s advance over the past year was helped by AI investment, rate expectations, and liquidity. But with indexes moving higher, narrative alone is no longer enough. Corporate profits need to keep growing if higher valuations are to be absorbed by fundamentals.
That same strength creates a tougher setup as well. When profit levels are already far above their long-term trend, market expectations rise with them. Simply meeting forecasts may not be enough to lift share prices. If revenue, margins, or guidance come in below what investors had built in, valuation pressure can increase quickly.
Three signals behind the report’s call on earnings strength
The report’s assessment of current earnings strength rests on three layers, according to the article.
First, the absolute level of S&P 500 EPS has kept rising and has moved clearly above its long-term trend band. Using a Deutsche Bank estimate cited in the report, several quarters of strong profit growth pushed S&P 500 EPS to 14% above that long-run channel.
Second, actual company results have broadly come in ahead of analyst forecasts. The article says the share of S&P 500 companies beating earnings expectations is near historic highs, while the aggregate magnitude of sales beats has climbed to a five-year high.
Third, earnings expectations have continued to move up instead of following the usual pattern of being revised lower once reporting season begins. The report says analysts raised bottom-up quarterly EPS estimates for the S&P 500 by 0.3% in July. Historically, the article notes, analysts usually trim forecasts in the first month of a quarter as they reflect more cautious management guidance and macro assumptions.
Taken together, those signals suggest the current U.S. equity rally is not being driven solely by multiple expansion. Corporate profits themselves are supplying support, and actual results are still coming in ahead of prior expectations.
Public Q2 earnings growth estimates cluster around 23% to 25%
The report highlights a 33.2% second-quarter earnings growth figure for the S&P 500, which the article describes as a level rarely seen in more than 30 years, behind only the unusual rebound phases that followed the global financial crisis and the pandemic.
Still, the article draws a distinction between that figure and publicly cited data. FactSet on July 2 projected S&P 500 second-quarter earnings growth of 23.3% year over year. Axios, citing FactSet, used 22.5%, while Bloomberg’s reading was about 25%.
Based on those public references, the article says the more precise way to describe the backdrop is that second-quarter S&P 500 earnings growth was roughly in a 23% to 25% range. It adds that the 33.2% figure in the report may reflect a different measurement date, sample scope, or adjustment method.
Even using the lower public range, the article says second-quarter earnings growth remains strong enough to give the index fundamental backing.
Why revisions matter as much as reported numbers
The significance of the current earnings improvement is not limited to a high second-quarter figure. The article argues that both actual results and forward expectations are moving higher at the same time.
Under normal conditions, analysts tend to cut numbers as reporting season unfolds, adjusting for company guidance, changing costs, and macro risks. This time, the pattern has gone the other way: reported earnings have beaten estimates, and analysts have then continued to raise forward EPS projections.
Citing Carson data referenced in the report, the article says the market started the year expecting about 13% earnings growth for the S&P 500 in 2026. That expectation has now risen to nearly 28%. The piece is careful to note that this is an institution-specific figure cited by the report, not a single unified public-market consensus.
The implication is straightforward. Bulls are no longer relying only on rate-cut expectations, liquidity, or the AI theme. They are also getting support from upward earnings revisions. As long as profits continue to beat forecasts and analysts keep lifting future estimates, stretched valuations may be worked off through earnings growth. If revisions stop rising, the market loses an important support pillar.
Earnings growth is broadening, but large tech still leads
Whether the earnings story can last depends in part on whether growth is spreading beyond a small group of mega-cap technology companies.
FactSet data dated July 20, as cited in the article, showed S&P 500 blended second-quarter earnings growth of 24.7%. Excluding the “Magnificent Seven,” the other 493 companies still posted 22.8% growth. That suggests the index’s earnings gains are not being generated entirely by a handful of very large technology stocks.
But the contribution from heavyweight names remains substantial. If Micron and NVIDIA are also excluded, the article says second-quarter S&P 500 earnings growth falls to 16.8%. The report also says that after removing star companies and one-off gains, earnings growth for the median S&P 500 company is about 13.8%.
The picture is more balanced than a simple mega-cap-only narrative, but not fully detached from it. Earnings growth has broadened, yet large technology and semiconductor names remain key engines for the index.
Sector breadth has improved, though differences remain
The sector view also points to broader improvement, with some variation depending on the dataset used.
According to the Deutsche Bank figures cited by the article, all S&P 500 sectors are on track for a second straight quarter of positive growth, and 8 of the 11 sectors may deliver double-digit gains. FactSet’s public figures from July 2 show 10 of 11 sectors expected to post year-over-year earnings growth, with health care the only sector expected to see earnings decline. On the revenue side, all 11 sectors were expected to post year-over-year growth.
That indicates earnings improvement is reaching most sectors, but not in a uniform way. Revenue growth shows sales are still expanding across the index. Final profits, though, are also shaped by wages, raw materials, depreciation, product mix, pricing power, and one-off items. The same pace of revenue growth can translate into very different profit outcomes from one sector to another.
The article’s conclusion is that broadening earnings matter because they widen the index’s profit base. The S&P 500 is not relying entirely on a few technology giants anymore. That still falls short of proving that every company and every sector has entered a synchronized growth cycle.
Why stronger earnings can raise the bar for stocks
Strong profits can support valuations, but they also create a tougher comparison base.
With S&P 500 EPS already 14% above its 90-year-plus trend channel, the article says the point is not that earnings are about to peak, nor that the market is set for an immediate pullback. The message is that profit levels are already well above their long-run trend, so future year-over-year growth rates will face a much higher base.
When expected earnings growth has been raised from about 13% at the start of the year to nearly 28%, the market has already priced in a fairly optimistic assumption set. From there, the test for companies is no longer simply whether growth exists, but whether growth can keep outpacing estimates that are themselves moving higher.
That is why an earnings season can look strong at the index level while individual stocks still fail to rise. Share prices respond to the gap between actual results and what the market had already expected. If investors were already looking for 20% revenue growth, an actual 20% print only meets the bar. If margins, orders, or forward guidance come in slightly below what had been assumed, stocks can still fall.
High earnings also make valuations more sensitive to bad news. Slower sales growth, margin pressure from costs, AI capital spending returns that come in below expectations, or a conservative next-quarter outlook from management can all trigger a sharper valuation reset.
Four variables to watch next
The article says four variables matter most in judging whether earnings can keep supporting the index.
- Revenue growth. Profits can improve temporarily through cost control, buybacks, or one-off gains, but revenue is a cleaner read on whether demand is genuinely expanding.
- Margins. Part of the current earnings strength comes from the high margins and scale advantages of large technology companies. If wages, energy, depreciation, or financing costs rise, revenue growth may not flow through into profits at the same rate.
- Returns on AI-related capital spending. Large technology companies are still committing major funds to data centers, chips, and cloud infrastructure expansion. Investors want to see those expenditures translate into cloud revenue, software subscriptions, advertising efficiency, or enterprise AI service income.
- The direction of earnings revisions. Whether analysts keep lifting 2026 and 2027 EPS forecasts may matter more than a single quarter’s growth rate. If revisions continue to move higher, valuations can keep their support. If revisions peak or turn lower, tolerance for expensive multiples may fade quickly.
The article’s overall read is that the most constructive signal in the current U.S. earnings cycle is the simultaneous improvement in near-term results, breadth, and forward expectations. The rise in the index is not resting only on liquidity or the AI theme. Profits themselves are also doing the work.
But that support is now sitting on top of unusually high profit levels and elevated expectations. The stronger the earnings backdrop, the easier it is to defend valuations. At the same time, the higher the expectation set, the more costly a miss becomes. What matters next is whether revenue, margins, and guidance can keep clearing a bar that has already moved higher.