AI boom set to push S&P 500 earnings growth to 32% this year

As per the latest business developments, Full-year earnings estimates for the S&P 500 are on the climb, underpinned by the artificial intelligence boom and stronger-than-anticipated first-half earnings.

Almost all firms in the S&P 500 have noted earnings, with 86% of them blowing past market observer expectations, the most since 2021, Bloomberg Intelligence data reveals.

The benchmark’s projected earnings expansion stands at 32% this year, according to Wall Street data compiled by Bloomberg, versus the 24% gain that was anticipated before the second-quarter reporting season, fuelled by upgrades for consumer discretionary and telecommunications firms.

“The massive AI build-out is the obvious catalyst for the outsized earnings expansion we’ve noted in 2026,” BI market observer Nathaniel Welnhofer stated, adding that the gain in the second quarter was tracking elevated than the first quarter’s pace, “which was unprecedented on its own.”

Second-quarter results stood out because market watchers had questioned whether firms would be able to meet heightened expectations after what had already been a firm start to the year.

The biggest estimate beats were among firms with AI ties such as Amazon.com Inc. and Alphabet Inc.

Communication services have noted the largest upward revision with earnings now projected to climb 51% this year, up from 26% at the start of the second quarter.

Within the sector, EchoStar Corp., Alphabet and Warner Bros Discovery Inc. were among some of largest upward revisions in the last three months. Communication services index heavyweight Alphabet benefited from firm ad topline upside and AI-fuelled monetization, while EchoStar posted the largest beat in the group, mainly fuelled by one-time events.

Even if the “unusually large” earnings contribution from one-time items is removed from the broader S&P 500, it stays one of the strongest quarters, stated BI market observer Rahul Jain.

Consumer discretionary earnings estimates saw the third-steepest upward revision following second-quarter results. Barring the automotive industry, all subsegments beat while Amazon’s results came in three times elevated than anticipated. Earnings are now noted rising 32% this year, up from around 12% previously.

“Retailers including Target, Walmart, TJX, Ross Stores and Estée Lauder beat EPS estimates and boosted guidance as consumer spending stays healthy,” BI market observer Wendy Soong stated.

The tech sector keeps benefit from rising capital spending tied to the propel for AI capabilities, though some headwinds are emerging.

“AI firms stay a major driver of S&P 500 earnings,” Welnhofer stated, adding that while the cohort may have peaked in the quarter and slower margin expansion raises the bar for monetization, fundamental resilience isn’t going away.

Rising costs are increasingly a drag. Apple Inc.’s sales outlook disappointed as rising memory prices and supply constraints further noted to wait times for products, while Nvidia Corp. warned that margins will narrow amid a surge in memory costs. Nvidia, Apple, and Microsoft Corp. are the heaviest weighted members in the index.

Energy firms are rising on a propel to provide reliable power and less-than-feared disruption from the Middle East conflict.

Estimates for ExxonMobil Holdings Corp. and Chevron Corp. were boosted. Chevron posted record earnings, while increased crude prices from the war in Iran boosted Exxon’s earnings by around $3.7 billion.

Baker Hughes Co. surprised the most among energy equipment and services firms as the Middle East war impact was milder than anticipated and orders came in elevated. The firm boosted its full-year outlook as industrial and energy technology orders doubled to a record $7.1 billion from a year earlier.

Earnings for financial firms were revised slightly elevated after the second quarter as catalysts are anticipated to persist into the third quarter.

“Robust capital markets, strengthening loan expansion, and clean credit collectively supported 2Q26 results,” Keefe Bruyette & Woods market observer Shreyank Gandhi stated.

Topline from trading in set income, equities, currencies and commodities, plus deal fees, are anticipated to climb in the third quarter, according to data compiled by BI. Credit trading is being supported by healthy activity in bonds and securitized products, while advisory fees are anticipated to climb from larger transactions, BI market observer Neil Sipes stated.

Equity trading topline may ease from a “standout” second quarter, though the moderation reflects normal seasonality rather than a broader slowdown in activity, Sipes stated.

Earnings expansion at mid-sized banks is anticipated to outpace larger regional lenders next year, BI market observer Eric Bedell stated, adding that the group is less sensitive to deposit cost pressures.