S&P 500 earnings: Midyear 2026 scorecard, AI impact and what to watch in Q3
Editorial Staff, J.P. Morgan Wealth Management
- Earnings have stayed resilient into midyear after several quarters of strong growth, but rising expectations mean the bar is higher going forward.
- Guidance and post-earnings estimate revisions often matter more than the headline beat or miss, as they may offer a cleaner read on the market’s evolving view.
- AI is showing up across earnings calls, but investors tend to reward companies that tie it to measurable revenue/usage, capex plans and margin impact.
- Margin durability is a key quality check on earnings strength: Consider whether profitability is supported by repeatable productivity gains versus one-time tailwinds.
- Sector dispersion remains, but broader market participation beyond a narrow set of AI-linked leaders could make earnings strength look more durable going into the third quarter.
With second-quarter earnings season underway, the early message from corporate America has been largely consistent: Profits have continued to be more resilient than many investors expected coming into 2026. For advisors, the more useful question isn’t whether companies “beat” estimates in a given week – it’s whether the fundamentals behind those results still look durable as the rest of the year unfolds.
The bar is also higher after a blowout first quarter boosted by massive spending on the artificial intelligence (AI) infrastructure buildout. It was Wall Street’s best quarter in six years, with 85% of S&P 500 companies beating consensus expectations – well above the 10-year average of 76%. When expectations rise, though, it can take more than a headline “beat” to impress markets.
The key debate within markets remains whether AI-driven demand can continue to justify elevated expectations and translate into more durable corporate earnings. J.P. Morgan Wealth Management’s Global Investment Strategy Group’s view is that 2026 earnings strength has been supported by a mix of steady demand and improved execution: Companies are finding ways to protect profitability through productivity, cost discipline and targeted investment. The next test is whether those supports hold as guidance updates roll in, especially around margins, capital expenditure (capex) and demand.
“While investors have been confronted with noise around interest rate policy, the true north for the equity market remains an earnings picture that is both durable and historically impressive,” J.P. Morgan Wealth Management’s Chief Investment Strategist Phil Camporeale said.
This article looks at U.S. corporate earnings – primarily S&P 500 companies – through the lens of broad trends rather than single-company outcomes. Results can differ widely by sector and business model, while earnings-season statistics can shift as more companies report.
State of U.S. corporate earnings in 2026: The midyear scorecard
Corporate earnings are essentially a function of two things: how much a company sells and how much it keeps. Revenue captures sales; profit margins capture the share of those sales left after costs. Earnings per share (EPS) can also move based on changes in share count: For example, if a company repurchases stock, EPS can rise even if underlying profit is steady.
The overall earnings picture remains solid so far in 2026, with analysts and companies notably more optimistic than usual. In the first quarter, despite concerns about rising energy costs and other risks, companies largely beat consensus estimates and gave reassuring guidance on the economy. Despite the bar being raised for the rest of the year, second-quarter results so far have pointed to continued earnings strength and momentum.
Another notable feature of this quarter hasn’t been the earnings results themselves but rather what happened before the results were released. In a typical quarter, analysts trim estimates by several percentage points as earnings season approaches. This time, data showed the S&P 500’s bottom-up EPS estimate rising meaningfully from late March to late June, by 3.4%, a pattern that has been relatively rare in recent years. In fact, this quarter saw the largest increase in earnings estimates since 2021. That matters because rising estimates raise the bar: Beating expectations is harder when expectations are moving up instead of down.
Zooming out, J.P. Morgan Wealth Management’s Global Investment Strategy Group’s view is that the positive 2026 earnings narrative has stayed intact so far: Growth has been broadly strong, and resilience has shown up across multiple parts of the market. That doesn’t mean every sector is moving in lockstep, but the center of gravity has been firmer than many expected earlier in the year.
Of the roughly 305 companies in the S&P 500 (61% of the index) that have reported second-quarter earnings as of July 31, 86% have topped estimates, per FactSet data. And as of that date, the blended earnings growth rate stands at 47.4% year over year, which is well above the five-year average earnings growth rate of 16.4%.
What’s driving 2026 earnings growth: AI demand, macro resilience and productivity
Across earnings commentary, several themes have repeated: steady demand in key parts of the economy, ongoing investment tied to AI and continued focus on productivity and cost discipline. Put simply, many companies have been able to protect margins by holding pricing power, improving efficiency or keeping a lid on expenses, even as investors remain alert to pockets of softness.
A practical way to break down the drivers is as follows:
- Demand and volumes: Are customers still buying, and are projects still moving forward?
- Pricing and mix: Can companies sustain pricing power, or is growth increasingly volume-driven? Are higher-margin products and services gaining share?
- Productivity and cost discipline: Are efficiency gains offsetting wage pressure and other costs?
- Balance-sheet effects: Interest expense, refinancing and share repurchases can influence EPS even when operating performance is steady.
One useful lens is separating one-time tailwinds from repeatable drivers. One-time items can include tax effects, favorable comparisons to a weak quarter a year ago, or accounting and timing differences. Repeatable drivers tend to show up in steadier demand, recurring revenue, durable margin improvement and productivity that continues quarter after quarter.
Where AI is – and isn’t – showing up in earnings
AI has become a near-constant topic on earnings calls, but not every mention is financially meaningful. When companies discuss AI in broad terms without tying it to revenue, costs, margins or investment levels, it may be more narrative than a near-term earnings driver.
The number of times companies mention AI in earnings calls is rising steadily. Between March 15 and June 11, the term “AI” was cited on 337 first-quarter earnings calls conducted by S&P 500 companies – the highest number over the past 10 years. What’s more, S&P 500 companies that did cite AI on earnings calls saw a higher average share price increase in the first half of 2026 compared with those that did not cite AI. Sectors such as information technology, communication services and financials had the highest percentage of first-quarter earnings calls citing AI, while consumer staples, materials and utilities saw the lowest percentage of companies mentioning the technology.
AI shows up in earnings in four main places. The first is revenue, through new products, improved conversion or higher demand for computing and related services. The second is costs, where automation and workflow changes can improve productivity. The third is capex, especially spending tied to infrastructure, data centers and modernization. The fourth is risk, including execution risk, competitive pressure and regulatory uncertainty.
When trying to separate AI signal from noise, a few questions can help:
- Is management tying AI to measurable revenue (or bookings/backlog), not just interest?
- Is the company describing adoption timelines and customer behavior (renewals, expansion, usage)?
- Is there clarity on margin impact such as near-term pressure, long-term leverage or both?
- Are capex plans explicit, and do they match the growth narrative?
- Are claims supported with metrics (productivity, cycle times, cost to serve), rather than general optimism?
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The sectors carrying earnings growth
Even in strong earnings periods, the market rarely moves as one. Dispersion is part of the story: Some sectors feel AI tailwinds directly, others benefit more indirectly through productivity and investment cycles, and some remain more sensitive to consumer or rate dynamics.
One of the most important developments so far in 2026 has been broader market participation. While a handful of big AI-linked names still command attention, more companies across more sectors have contributed to S&P 500 earnings growth. This marks an important difference compared to periods when gains were more narrowly concentrated.
At the sector level, all 11 sectors are reporting year-over-year revenue growth – and five have reported double-digit growth. The information technology sector accounted for an outsized portion of the S&P 500 index’s revenue growth in the first quarter (29.2%), followed by communication services (15.1%) and utilities (13.9%). Sectors such as energy (4.1%), healthcare (7%) and consumer staples (7.1%) contributed the least to S&P 500 revenue growth.
If second-quarter earnings growth comes in anywhere near current expectations, it would also mark the seventh consecutive quarter of double-digit earnings growth for the S&P 500, the longest streak since the aftermath of the Great Recession. Still, the takeaway isn’t that every sector is strong – it’s whether strength is adequately broadening and whether weaker pockets are staying contained.
What to watch for: 2026 earnings can stay strong or start to slow
As second-quarter reporting progresses, investors may be keeping an eye on any changes for the rest of 2026. A few signals to look for:
· Guidance and visibility: What’s reaffirmed versus walked back.
· Gross and operating margins: Whether strength looks structural or temporary.
· Hiring and labor costs: Selective hiring, freezes, layoffs and wage pressure.
· Capex plans: Especially AI and infrastructure.
· Demand tone: Orders, churn, renewals and customer budgets.
If you track only one thing across earnings season, consider tracking revisions – whether analysts are raising or cutting forward EPS estimates after companies report. Revisions can be a cleaner read on the market’s evolving view than the beat/miss tally.
But rather than basing decisions on the results of a single quarter, investors may want to use earnings season as a framework: What would have to be true for estimates to keep rising, and what would likely lead to downward revisions?
Scenario 1: Estimates stay firm or rise. Demand holds up, margins remain durable and AI-related investment translates into either incremental revenue or measurable efficiency. Guidance stays constructive, and earnings participation continues to broaden beyond a narrow set of winners.
Scenario 2: Revisions turn lower. The shift would likely show up first in the forward outlook: wider guidance ranges, more caution on customer budgets, delayed capex and margin pressure that looks harder to offset with productivity. One weak quarter doesn’t change the story on its own, but a pattern of downward revisions can.
For investors, the practical takeaway is less about predicting the next quarter and more about aligning their plan with their time horizon. Earnings seasons can be volatile, and pullbacks can happen even in strong years, which is why many advisors emphasize diversification, liquidity needs and staying anchored to goals rather than headlines.
The bottom line: 2026 has been strong, but Q3 will test the story
Second-quarter results have reinforced a resilient earnings narrative, supported by steady demand, continued investment and improved execution. But the strong performance has also raised the bar for future earnings expectations. J.P. Morgan Wealth Management’s Global Investment Strategy Group’s view is that the third quarter will be the credibility test – not just for the level of earnings, but for management confidence in margins, hiring plans, capex and the demand outlook.
For investors, the win isn’t calling every quarter correctly. It’s using earnings season to track the signals that matter and keeping the 2026 narrative in focus instead of getting pulled into week-to-week noise. Earnings are backward-looking, guidance can change, and outcomes will continue to vary by sector and company.
Frequently asked questions about earnings reports
Earnings season is the weeks-long stretch each quarter when many public companies report results and update their financial outlook. It moves markets because investors reprice stocks based on whether results and guidance change expectations for future profits.
Earnings growth is the change in profits (often EPS) compared to a prior period, while revenue growth is the change in sales. Earnings can rise even if revenue is flat (think improving margins, falling costs or share count declines due to buybacks).
Earnings guidance is management’s forecast or range for future results (often revenue, EPS, margins or capex). It can move markets because it directly influences analysts’ estimates and can signal whether the company’s momentum is strengthening or fading.
All three matter, but guidance typically drives immediate price reactions because it resets investor expectations. Margins and capex often determine whether the story looks sustainable, especially if spending is rising faster than revenue.
Look for measurable proof such as AI-related revenue or usage metrics, clear customer adoption timelines, and disclosed capex or cost-savings tied to AI. Vague references without numbers, timelines or margin implications are more likely narrative than true earnings drivers.
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Editorial Staff, J.P. Morgan Wealth Management
