The upcoming third-quarter earnings figures serve as the final indicator of corporate performance within a challenging operational environment, ultimately helping determine the trajectory of the 2026 stock market. Across the year-to-date period, the Nasdaq 100 has outperformed alternative indices. The US technology benchmark has gained 21.6 percent, while the Dow Jones has risen 6.8 percent and the Euro Stoxx 50 has advanced 5.8 percent, preceding the Swiss Market Index, which recorded a 2.7 percent price gain.
Strategists at Deutsche Bank, Goldman Sachs, and UBS collectively project a positive reporting season. Goldman Sachs highlights that market consensus expects S&P 500 earnings per share to grow by 27 percent year-on-year for the third quarter. This projection represents the highest starting consensus growth rate at the onset of a reporting season since 2021. Nevertheless, the third-quarter consensus implies a deceleration compared to the 33 percent growth rate achieved in the second quarter. Neither current macroeconomic data nor signals from the artificial intelligence investment boom indicate a third-quarter slowdown, leaving the market positioned for results that exceed consensus expectations, according to Goldman Sachs strategist Ben Snider.
Information technology and energy sectors are expected to contribute nearly 80 percent of the current quarter's earnings growth, mirroring previous quarters. Furthermore, the median earnings per share for these respective sectors are projected to increase by over 30 percent year-on-year. Conversely, bottom-up estimates for consumer sectors are notably pessimistic, showing no sector-level profit growth. Analyst estimates across sectors exhibit significant dispersion.
At the individual title level, artificial intelligence infrastructure equities are projected to account for over half of the S&P 500 earnings growth in the third quarter. The ten equities delivering the largest contributions are anticipated to drive more than two-thirds of total S&P 500 earnings growth for the period, with Micron and Nvidia combined representing over a third of the index growth. Micron's recently published results initiated the quarter strongly, reporting a 1,000-percent year-on-year earnings growth, beating consensus earnings per share estimates, and issuing a robust outlook.
UBS strategist Keith Parker reaches similar conclusions regarding growth and dispersion. Parker notes that S&P 500 earnings and revenues have advanced substantially, while consensus projections for medium-term revenue growth have reached levels unseen in decades, a pattern typical of recovery phases. Simultaneously, corporate profitability, measured through the proprietary HOLT-CFROI indicator, has climbed by nearly 10 percentage points over the past five to six years. CFROI, or Cash Flow Return on Investment, measures the economic return of a business relative to total invested capital as an internal rate of return, facilitating comparable cash flow generation analysis across asset lifecycles.
Closer examination reveals substantial variances in growth and CFROI trends. The leading 20 to 40 percent of US companies, categorized by expected average annual revenue growth rate and CFROI, continue to expand their advantage in growth and profitability relative to lagging peer groups. Looking toward 2027, revisions for the S&P 500 index remain highly positive, which could further widen the earnings growth gap, according to Deutsche Bank strategists led by Maximilian Uleer.
For the United States, 2027 earnings growth is projected at 18 percent, representing a decrease from nearly 30 percent in the current year, yet remaining above European forecasts of 15 percent for 2026 and 10 percent for 2027. Regarding 2027, European revisions appear positive both including and excluding the energy sector, rendering consensus forecasts for a 10 percent earnings growth broadly plausible, though estimates typically face downward revisions throughout the year. While earnings expectations and the 2027 outlook face potential pressure as energy cost hedges expire from the fourth quarter onward, positive economic momentum and elevated inflation support stronger earnings growth.
