Market estimated earnings for the S&P 500 for the third quarter are higher today compared to expectations at the start of the quarter. In addition, the index is expected to report earnings growth above 25% for the third-straight quarter. As of today, the S&P 500 is expected to report (year-over-year) earnings growth of 29.5%, compared to the estimated (year-over-year) earnings growth rate of 26.7% on June 30. If 29.5% is the actual growth rate for the quarter, it will mark the third consecutive quarter of earnings growth above 25% and the eighth consecutive quarter of double-digit earnings growth for the index. As of today, the S&P 500 is expected to report (year-over-year) revenue growth of 12.3%, compared to the expectations for revenue growth of 10.9% on June 30. If 12.3% is the actual revenue growth rate for the quarter, it will mark the third consecutive quarter of double-digit revenue growth for the index. AI monetization and productivity will remain key themes during the Q3 earnings season. Last quarter, hyperscaler cloud revenue growth accelerated to 48% alongside surging revenue backlogs, boosting investor confidence in the likely return on AI investments. We now anticipate a further acceleration to 55% in Q3. Timelines: By the end of October, roughly 70% of S&P 500 market cap will have reported results. Most of the mega-cap hyperscalers are scheduled to report during the last week of October. Nvidia, the largest stock in the index, is expected to report the third week of November. We expect wide dispersion at the sector level, with Info Tech and Energy powering aggregate S&P 500 earnings growth. The two sectors combined are expected to contribute nearly 80% to this quarter’s earnings growth, and the median stock in each of those sectors is expected to grow EPS by more than 30% year/year. In contrast, bottom-up estimates are particularly pessimistic in the consumer sectors, where estimates show no EPS growth at the aggregate sector level.
