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FOCUS ON TECH, ENERGY, "HIGH BAR FOR COMPANIES" IN UPCOMING EARNINGS

Two big contributors to the expected strong U.S. second-quarter earnings growth will be tech and energy, "which carry very different investment profiles and are unlikely to move in the same direction on the same catalysts in the back half of the year," according to Anthony Saglimbene, Ameriprise chief market strategist.

"Technology remains the center of gravity for both the earnings season and how investors judge market leadership," he says in a note Thursday.

"At the industry level, all six Tech industries are expected to post year-over-year earnings growth, led by Semiconductors and Semiconductor Equipment at an eye-popping +131%. Importantly, if Semiconductors were excluded from the sector, the expected Info Tech EPS growth would still be a very healthy +25.7%, suggesting Tech leadership is broad but heavily amplified by semis," he notes.

"We believe the AI capital cycle powering these numbers has grown so large that it now dictates how the entire market interprets the quarter, and expectations for the group are elevated enough that even strong results paired with in-line guidance may not be sufficient to move stocks higher," he adds.

Of note, combined capital spending by the largest hyperscalers is estimated to have risen roughly 74% year-over-year in the second quarter, he says. "The debate is whether that spending is producing revenue at a pace investors are willing to reward."

Energy's improvement is "one of the more overlooked features heading in" to earnings, he says.

"Of course, the primary driver is higher average oil prices versus last year, with Q2’26 average crude prices approximately +45% above Q2’25 levels."

Energy and tech, however, hold different investment profiles.

Overall, the bar is high for S&P 500 companies in the second quarter, with stock prices high as well.

Analysts have moved in the opposite direction from their historical pattern this earnings season, with estimates rising ahead of the season versus the more typical decline in estimates over the past several years.

"Companies will need to do more than just beat estimates for their stock prices to keep climbing," he says.

If beats come with just in-line guidance, or if hyperscaler capex commentary raises new questions about spending and returns, investors' tolerance for imperfection may prove even thinner than expected, Saglimbene says.

Saglimbene cited FactSet and Bloomberg data for his analysis.

U.S. second-quarter earnings kick off next week with results from the nation's biggest banks.

For the second quarter that just ended, S&P 500 companies are expected to report aggregate earnings growth of 23.4% from a year ago, according to LSEG IBES, which compiles estimates from analysts. That's substantially higher than the 15.2% growth that had been expected for the period when the year began. Projections for the rest of 2026 have also boomed.

(Caroline Valetkevitch)

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