Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
- The Q1 earnings season continues to show strength and momentum, with companies not only comfortably beating consensus estimates but also providing a reassuring read on the economy despite elevated energy costs and other risks. The momentum is particularly notable on the revenues side, both in terms of the growth pace as well as the beats percentages.
- Total Q1 earnings for the 221 S&P 500 companies that have already reported results are up +22.3% from the same period last year on +10.1% higher revenues, with 77.8% beating EPS estimates and an equal proportion beating revenue estimates.
- Nvidia and Micron are material contributors to the Tech sector’s growth profile in 2026 Q1 and the coming quarters. Excluding the contribution from these two semiconductor players, Q1 earnings growth for the rest of the Zacks Tech sector drops to +12.6% (from +29.7%).
- Q1 earnings for the ‘Magnificent 7’ group of companies are expected to be up +20.2% from the same period last year on +22.2% higher revenues. Excluding the ‘Mag 7’ contribution, Q4 earnings for the rest of the index would be up only +13.2% (vs. +14.9%).
A Steadily Improving Earnings Outlook
The overall earnings picture emerging from the Q1 earnings season continues to be not only strong but steadily improving as well. This favorable earnings backdrop is showing up in the revisions trend, which we show in a chart nearby.
We are also starting to see the earnings impact of renewed cost pressures as a result of high oil prices and the associated impact on freight in a variety of industries, particularly if they are unable to offset the cost increases through price hikes. The cases of GE Healthcare GEHC, Honeywell HON, Southwest Airlines LUV, and others spotlight this new trend, which will likely be even more front-and-center when the Q1 reporting cycle shifts to the retail sector in the coming days.
The chart below shows how 2026 Q2 earnings growth expectations have evolved in recent weeks.
Image Source: Zacks Investment Research
The sectors enjoying positive estimate revisions since the start of April include Energy, Tech, Basic Materials, Utilities, and Business Services. But Q2 estimates in the aggregate would be modestly down since the start of the period, had it not been for the substantial increase in Energy sector estimates.
The chart below shows S&P 500 expectations for 2026 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the following three quarters.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
An interesting development on the revisions front has been the evolution of full-year 2026 estimates since the start of the Iran war. No surprises in the trend reversal in Energy sector estimates since the start of March, but estimates for 8 other sectors have also moved higher in that time period. The Tech sector’s positive revisions trend has continued in this period, while the revisions trends for the Basic Materials and Consumer Staples sectors shifted from negative to positive since the start of March.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
