Earnings Outlook Improves: A Closer Look

By Sheraz Mian | February 04, 2026, 7:20 PM

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

The picture emerging from the Q4 earnings season is one of a steadily improving earnings outlook that is starting to show up in a favorable estimate revisions trend. Estimates are not only increasing for the Tech sector but also for some economically sensitive sectors, such as Basic Materials and Industrials.

Total earnings for the 236 S&P 500 members that have reported Q4 results are up +12.6% from the same period last year on +8.2% higher revenues, with 81.8% beating EPS estimates and 70.8% beating revenue estimates.

The Q4 earnings and revenue growth pace at this stage represent a clear acceleration from what we had seen from this group of companies in other recent periods. Positive beats were earlier tracking below historical averages, but have now moved in line with those levels.

For the Tech sector, we now have 2025 Q4 results from 51.5% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +16.6% from the same period last year on +16.1% higher revenues, with 92.7% beating EPS estimates and 90.2% beating revenue estimates. This is a notably better performance from these Tech companies relative to other recent periods.

The Evolving Tech Sector Earnings Picture

Regular readers are well aware of the Tech sector’s critical role in the aggregate earnings growth picture. In fact, the sector has been a key driver of aggregate earnings growth since the second quarter of 2023. This followed a roughly six-quarter period starting in 2022 Q1, when the sector had become a growth drag. Not only has the Tech sector been producing impressive earnings growth, but the sector has also been consistently enjoying a favorable estimates revision trend for some time now.

The Tech sector’s strong earnings profile has provided the fundamental underpinning for the group’s positive stock market momentum. But not all Tech stocks have been thriving lately, with software stocks in particular struggling in the market.

A case in point is the recent Gartner IT quarterly release, in which it beat EPS and revenue estimates but provided subpar guidance. Artificial intelligence-centric disruption and disintermediation worries had already been weighing on Gartner shares, and the company’s weak guidance added to those worries. This is the third quarter in a row that Gartner has disappointed the market with its earnings results, which is on full display in the stock’s -71% decline in the trailing 12-month period.

Gartner isn’t technically a software player like Adobe ADBE but rather a provider of information technology consulting services, like Accenture ACN. While market participants see downside risks to both the legacy software and IT consulting business models, sentiment is particularly negative on the latter.

You can see this in the stock market performance of these stocks, as we show in the chart below that illustrates the one-year performance of Gartner, Accenture, and Adobe relative to the Zacks Tech sector and the S&P 500 index.