S&P 500 companies are on track to achieve 32% year-over-year earnings per share growth in the second quarter of 2026, following a 30% jump in the first quarter. This consecutive streak of earnings growth is among the strongest in history.
Strategists at Bank of America, led by Savita Subramanian, pointed out that such sequences of earnings per share exceeding 30% have occurred only 10 times since 1936, and the most recent examples were linked to sharp declines in profits, such as the collapse in corporate earnings during the COVID-19 pandemic and the global financial crisis, rather than the AI-driven organic expansion the market is currently experiencing. This historical exception is shaping Wall Street's thinking about the outlook for stocks through 2027.
With nearly 90% of S&P 500 companies reporting their results for the quarter ending in June, Bank of America Group data shows earnings per share up 30% year-over-year, excluding gains from investments in Alphabet and Amazon, with an expectation-busting rate of 76%, the highest since 2021.
According to Reuters, of the 436 companies that announced their results up to August 8, 2026, 85.1% exceeded analysts' expectations, surpassing the historical average of 68% since 1994.
JPMorgan Chase & Co. raised its 2026 earnings estimate for the S&P 500 to $365 yesterday, implying nearly 35% year-over-year growth and exceeding market expectations of $358. It also increased its year-end price target to 8,000 points, up from 7,800 previously, citing broad-based earnings strength and a more pronounced shift in revenue from artificial intelligence. This target represents a roughly 3.1% increase from the index's last closing price of 7,753.11 on Monday.
However, JPMorgan Chase & Co. noted that private equity valuations boost its reported 2026 earnings per share by about $18, based on first-half figures. Excluding this component, standard earnings per share would be $347, representing about 28% year-over-year growth.
Cloud infrastructure is a key pillar in the optimistic scenario. Amazon's cloud computing services revenue growth accelerated to 37% year-over-year in the second quarter, Microsoft's cloud computing services grew by 43%, and Google's cloud computing services recorded record growth of 82%, reinforcing what JPMorgan Chase & Associates strategists have described as the thesis of converting AI capital expenditure into revenue.
The bank expects AI capital spending, according to consensus forecasts, to reach approximately $900 billion by the end of 2026, an 85% year-over-year increase, and to exceed $1.2 trillion by the end of 2027. JPMorgan Chase & Co. analysts stated, “With the high backlog of orders translating into recognized revenue, cloud computing growth should remain well supported, helping to justify the rising AI capital expenditure, bolster order fulfillment, and alleviate concerns about return on invested capital.”
At least seven brokerage firms now adopt JPMorgan Chase & Co.’s year-end 8,000 target for the S&P 500, according to Investing.com’s market context data, reflecting the extent of the fundamental shift in institutional investor sentiment as a result of the earnings expectations upswing cycle.
The index has gained about 13.3% since the beginning of the year through early August 2026, supported by optimism related to artificial intelligence and the rate of exceeding expectations in the second quarter, which significantly surpassed historical rates.
Subramanian’s team wrote: “The consensus expects growth to fall below 20% in the first quarter of 2027 and decline to the mid-20s for the full year 2027. While these rates are healthy by historical standards, markets tend to become less supportive as earnings growth slows, since years of above-average growth in earnings per share typically lead to weaker stock returns as the pace of growth slows.”
This concern is compounded by the unusual nature of the current sequence; previous earnings per share sequences exceeding 30% followed sharp contractions, automatically giving them a low base of comparison, whereas this is not the case with the present situation.
Several near-term catalysts could either confirm or complicate the slowdown thesis. July's Consumer Price Index (CPI) data is due on Wednesday, with economists polled by Reuters expecting a 3.4% year-on-year reading, compared to the previous 3.5%. This slight decline, if confirmed, could ease pressure on the Federal Reserve's interest rate expectations and support the high valuation multiples of stocks.
On the same day, a $125 billion Treasury bond auction is held, a supply-related dynamic that JPMorgan Chase & Co. cited as a reason for keeping its forward price multiple at around 20 times, despite the strong earnings momentum.
