The S&P 500 is seeing substantial earnings growth, with projections for the third quarter of 2026 at 28.9%, marking the third consecutive quarter of growth above 25%. Revenue growth is also strong, expected at 11.9% for the third quarter, continuing a trend of over 10% growth. Goldman Sachs and Deutsche Bank are optimistic, with Deutsche Bank reaffirming an S&P 500 year-end target of 8,000 and an EPS forecast of $420 for 2027, implying nearly 17% growth. HSBC Global Research projects a 33% full-year earnings growth for 2026, with EPS reaching $360.
This growth is largely attributed to the artificial intelligence boom, with AI investments accounting for nearly 50% of the S&P 500's earnings growth in 2026. Infrastructure-related stocks, such as chipmakers, are forecast to see profits surge by 54%, contributing significantly to this growth. All 11 sectors of the S&P 500 are expected to report earnings growth in the third quarter, a first since 2021. The energy sector leads with approximately 110% growth, followed by technology at about 63%. Within technology, chipmakers and their equipment suppliers are projected to grow earnings by 126%.
Despite the positive outlook for overall earnings, there are some headwinds. Equity analysts have turned net negative on the outlook for US corporate earnings for the first time in months, ending the longest run of upgrades since September 2021. Concerns about inflation, higher interest rates, and rising energy prices are impacting sectors like consumer staples, discretionaries, materials, and financials. The Federal Reserve recently hiked interest rates by 25 basis points, raising the target range to 3.75%-4.00%, in response to persistent inflation.
