--- title: "Wall Street Bulls Gain Confidence: S&P 500 Earnings Growth Hits 30-Year High" type: "News" locale: "en" url: "https://longbridge.com/en/news/296015148.md" description: "S&P 500 Q2 earnings grew 31% year-over-year, marking the strongest growth rate since Bloomberg Intelligence began tracking in 1992 (excluding recession recovery periods), far exceeding the 23% expectation. AI-driven profit margins jumped from 14% to nearly 16%, while valuations reset from 26x to below 22x. Earnings expansion has spread to small cap stocks and markets in Europe and Asia-Pacific" datetime: "2026-08-16T06:57:55.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296015148.md) - [en](https://longbridge.com/en/news/296015148.md) - [zh-HK](https://longbridge.com/zh-HK/news/296015148.md) --- # Wall Street Bulls Gain Confidence: S&P 500 Earnings Growth Hits 30-Year High During this earnings season, U.S. corporate earnings have significantly exceeded expectations. The S&P 500's Q2 earnings grew 31% year-over-year, not only surpassing Wall Street Expectations of 23% by a wide margin but also representing the strongest growth rate since Bloomberg Intelligence began tracking data in 1992, excluding recovery periods following major recessions. With over 90% of constituent companies having reported, the index's first-half earnings performance is poised to be the best since the same period in 2021. The drivers are twofold: the accelerated penetration of artificial intelligence (AI) is compressing costs and boosting profit margins; meanwhile, the U.S. economy has demonstrated unexpected resilience amid multiple headwinds, including soaring energy prices triggered by tensions involving Iran. Marta Norton, Chief Investment Strategist at Empower, stated, "Given the current macro backdrop, these results stand out even more." ## AI Transforms from "Cost Center" to "Profit Center" The net profit margin of S&P 500 members, which had long struggled to break through 14%, is now approaching 16%. Mark Hackett, Chief Market Strategist at Nationwide Funds Group, pinpointed the turning point: **"Over the past five years, AI was a cost center for most companies, with only hyperscale cloud providers benefiting in terms of stock price. This year marks an inflection point—AI is truly beginning to act as a profit center."** 22V Research estimates that AI has boosted profit margins by approximately 150 basis points. While the technology sector still boasts the highest margins in the S&P 500, an increasing number of companies in other industries are explicitly quantifying the benefits of AI during earnings calls. This trend is not unique to the United States. According to Deutsche Bank data, European corporate net profit margins surged to a record 12% in Q2. BI data shows that European executives mentioned AI an average of more than four times during earnings calls, hitting a historical peak, far above the average of 0.5 times since 2016. Barclays strategists, including Emmanuel Cau, noted, "Quantifiable cost and efficiency gains have become core topics, with more management teams discussing realized benefits." ## Internal Divergence in Tech: Who Is Delivering AI Returns This earnings season has also drawn a clear line within the technology sector: companies that can prove their AI investments are generating cash returns have been rewarded by the market, while those that cannot have been penalized. Marta Norton pointed out: **"Cloud business may be the clearest signal."** She specifically highlighted the strong performance of Amazon and Microsoft, both of which exceeded expectations in their cloud businesses. In contrast, Meta, the parent company of Facebook, saw its stock price drop sharply after providing revenue guidance that the market viewed as disappointing, though it has gradually recovered some losses recently. The earnings report of chip giant Nvidia has yet to be released and will be the focus of market attention this month. ## Valuations Compress as Earnings Do the Heavy Lifting Earnings growth has outpaced the index's own price gains, leading to a key change: valuation compression. The S&P 500's P/E ratio has fallen from around 26x at the beginning of the year to below 22x. One of the biggest concerns at the start of the year was excessive valuation, but this risk is now being absorbed by earnings growth. Keith Lerner, Chief Investment Officer and Chief Market Strategist at Truist Advisory Services, said, "We have undergone a nice reset, making valuations more attractive." Even in the technology sector, which has seen earnings growth exceed 20% for seven consecutive quarters, valuation multiples have declined. Lerner believes that given the uncertainty surrounding Federal Reserve policy and energy prices, tech valuations are unlikely to return to previous highs. Scott Rubner, Head of Equity and Derivatives Strategy at Citadel Securities, wrote in a report: **"Currently, it is earnings doing the heavy lifting, rather than valuation expansion."** Grace Peters, Co-Head of Global Investment Strategy at J.P. Morgan Private Bank, stated on Bloomberg Television: "The magnitude of earnings upgrades is almost unprecedented—you don't see double-digit upgrades outside of recovery periods." ## Earnings Diffusion: Not Just a Large-Cap Story Wall Street strategists are optimistic about the sustainability of the earnings outlook, as growth has covered nearly all sectors—healthcare is the only sector in the S&P 500 to experience earnings contraction. Data from Bespoke Investment Group shows that as of August 12, about three-quarters of the approximately 1,500 U.S. listed companies that have reported earnings simultaneously beat expectations for both earnings per share and revenue. Ed Clissold, Chief U.S. Strategist at Ned Davis Research, stated: **"This story has gone beyond mega-cap stocks."** He noted that the beat rate for small cap stocks is near post-pandemic historical highs. Rob Haworth, Senior Investment Strategy Director at U.S. Bank Wealth Management, said, "This earnings season shows positive breadth, which usually means the same momentum will continue." ## Global Resonance: Europe and Asia-Pacific Strengthen in Sync Earnings improvement is not exclusive to the United States. BI data shows that constituents of the MSCI Europe Index saw Q2 earnings grow 18% year-over-year, the best performance since 2022. Cyclical sectors such as energy, materials, and industrials made significant contributions, driving the STOXX Europe 600, Germany's DAX, and France's CAC 40 to successive record highs. Benedicte Lowe, Equity Derivatives Strategist at BNP Paribas, stated on Bloomberg Television: "The European macro story is improving, which is undeniable. Moreover, this is happening while market positioning remains at low to neutral levels, painting a positive picture for equities." Barclays analysis also found that the proportion of European companies raising performance guidance reached a four-year high, with management confident in maintaining high profit margins. The Asia-Pacific region is also keeping pace. Since June, earnings expectations for the MSCI Asia Pacific Index have been revised up by nearly 10%, the largest increase for the same period since 2009. Asian financial stocks just recorded their strongest single-month outperformance relative to the MSCI Asia Pacific Index since 1998. Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management, said, "The AI theme remains dominant, especially in semiconductors. But investors are increasingly looking beyond obvious chip stocks—to non-chip AI beneficiaries, financial stocks, and other lagging sectors with less valuation pressure." ## Outlook: Strategists Raise Target Prices Strong earnings performance is driving Wall Street strategists to raise their year-end target prices for the S&P 500. The current average forecast has risen to 7,894 points, leaving about 1% upside potential from the market level that hit a historic high this week. Analysts have also raised the full-year earnings growth expectation for the S&P 500 from 15% to 27% by early 2026. Nvidia's earnings report will be the final important piece of the puzzle this month, and its results may further test the quality of this earnings-driven bull market. ### Related Stocks - [IVV.US](https://longbridge.com/en/quote/IVV.US.md) - [VOO.US](https://longbridge.com/en/quote/VOO.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [SPY.US](https://longbridge.com/en/quote/SPY.US.md) - [SPLG.US](https://longbridge.com/en/quote/SPLG.US.md) - [SPXL.US](https://longbridge.com/en/quote/SPXL.US.md) - [UPRO.US](https://longbridge.com/en/quote/UPRO.US.md) - [SSO.US](https://longbridge.com/en/quote/SSO.US.md) - [SH.US](https://longbridge.com/en/quote/SH.US.md) - [SPXS.US](https://longbridge.com/en/quote/SPXS.US.md) - [SPXU.US](https://longbridge.com/en/quote/SPXU.US.md) - [SDS.US](https://longbridge.com/en/quote/SDS.US.md) - [SPYI.US](https://longbridge.com/en/quote/SPYI.US.md) - [JEPI.US](https://longbridge.com/en/quote/JEPI.US.md) - [XYLD.US](https://longbridge.com/en/quote/XYLD.US.md) - [DB.US](https://longbridge.com/en/quote/DB.US.md) - [DBK.DE](https://longbridge.com/en/quote/DBK.DE.md) - [BCS.US](https://longbridge.com/en/quote/BCS.US.md) - [BARC.UK](https://longbridge.com/en/quote/BARC.UK.md) - [AMZN.US](https://longbridge.com/en/quote/AMZN.US.md) - [MSFT.US](https://longbridge.com/en/quote/MSFT.US.md) - [META.US](https://longbridge.com/en/quote/META.US.md) - [NVDA.US](https://longbridge.com/en/quote/NVDA.US.md) - [TFC.US](https://longbridge.com/en/quote/TFC.US.md) - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [USB.US](https://longbridge.com/en/quote/USB.US.md) - [BNPQY.US](https://longbridge.com/en/quote/BNPQY.US.md) - [03KB.DE](https://longbridge.com/en/quote/03KB.DE.md) - [DPB.DE](https://longbridge.com/en/quote/DPB.DE.md) - [NVD.DE](https://longbridge.com/en/quote/NVD.DE.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [LIVE MARKETS-From inflation fears to growth fears](https://longbridge.com/en/news/295427746.md) - [GRAPHIC-U.S. equity funds draw inflows as rate-hike concerns ease](https://longbridge.com/en/news/295935286.md) - [LIVE MARKETS-S&P 500 futures strengthen, yields slide after jobs data](https://longbridge.com/en/news/295239484.md) - [S&P Futures Gain on U.S.-Iran Deal Prospect](https://longbridge.com/en/news/294951611.md) - [Stocks could soar in August. Here are six potential drivers.](https://longbridge.com/en/news/294846444.md)