A Broad-Based Earnings Growth Picture as Revisions Stay Positive

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:

• Total S&P 500 earnings are currently expected to increase +24.0% from the same period last year on +11.3% higher revenues, with 14 of the 16 Zacks sectors expected to enjoy positive earnings growth and 6 sectors producing double-digit growth. This will be the most broad-based earnings growth performance in recent times.

• The revisions trend remains positive, sustaining the favorable revisions trend that has been in place for a year now. Since the start of Q3, earnings estimates have moved higher for half of the 16 Zacks sectors.

• With Conglomerates (-35.4%) as the only Zacks sector expected to have lower Q3 earnings relative to the year-earlier period, the quarter is on track to produce an impressively broad-based growth performance. Q3 will also be the 8th straight quarter of double-digit earnings growth for the S&P 500 index.

• Micron (MU) and Nvidia (NVDA) continue to be material contributors to the Tech sector’s growth picture. Excluding these two companies, Q3 earnings for the rest of the Tech sector would be +23.7% (vs. +42.0% otherwise).

The Earnings Big Picture

The chart below shows S&P 500 expectations for 2026 Q3 in terms of what was achieved in the preceding four periods and what is currently expected for the following three quarters.

The chart below shows how Q3 earnings growth expectations have evolved lately.

Since the start of Q3, the Energy sector has enjoyed the most pronounced upgrade to its earnings outlook, reflecting elevated oil prices as a result of the Persian Gulf situation. Other sectors enjoying positive estimate revisions since the start of Q3 include Aerospace, Industrial Products, Tech, Autos, Transportation, Finance and Utilities. It is significant to note that the aggregate revisions trend would still be positive if we excluded the positive revisions to the Energy or Tech sector.

The Tech sector remains a major contributor to aggregate earnings growth, with Q3 earnings growth dropping to +14.5% once the sector’s contribution is excluded from the index. The semiconductor industry within the Tech sector has enjoyed a particularly robust demand environment lately, and that trend remains in place in Q3 as well, with Nvidia and Micron alone accounting for a significant part of the sector’s growth, as the chart below shows.

The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.

The favorable revisions trend noted earlier in the context of Q3 estimates is also at play with estimates for the last quarter of the year, with mostly the same sectors enjoying positive revisions.

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This article originally published on Zacks Investment Research (zacks.com).

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