AI-linked companies expected to drive most S&P 500 earnings growth

S&P 500 companies are expected to report about 31% year-on-year earnings growth for the third quarter in the United States, Reuters reported on October 9, with roughly two-thirds of the increase coming from technology and AI-linked heavyweights. The forecast puts those businesses at the centre of the coming earnings season after technology shares helped lift the index to a record high this week.

The estimate, attributed to Tajinder Dhillon, LSEG’s head of earnings and equity research, measures expected profit growth across large listed US companies. It is not a completed result. The roughly two-thirds contribution comes from the technology sector together with Alphabet, Amazon.com and Meta Platforms; it does not mean those businesses generate two-thirds of all corporate profits.

The earnings season is expected to unofficially begin next week with banks including JPMorgan Chase and Goldman Sachs, Reuters reported. Their releases will open a closely watched reporting period, although that convention does not mean no index constituent has already reported.

AI-linked earnings growth is concentrated

Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, offered an even higher assessment of the concentration. “It wouldn’t surprise me if 70-80 per cent of the growth can be attributed to tech and AI,” he told Reuters. His assessment is separate from LSEG’s roughly two-thirds estimate.

Semiconductors illustrate both the strength of expectations and the difficulty of sustaining their pace. Dhillon told Reuters that LSEG expected US semiconductor earnings to increase about 136% in the third quarter, compared with approximately 158% in the second. That would still represent a substantial profit increase, despite slower percentage growth.

FactSet shows expectations rose during the quarter

FactSet’s October 2 earnings preview put expected third-quarter growth at 29.5%, up from its 26.7% estimate on June 30. Its figure and LSEG’s later 31% estimate come from different providers and dates, so the difference between them cannot be treated as a revision within one consistent series.

Analysts raised per-share earnings estimates by 1.4% between June 30 and September 30, FactSet said. That reversed the usual pattern: estimates fell by an average of 2.2% during a quarter over the preceding five years and 2.5% over ten years.

Company guidance was also more positive than usual. Of 116 companies providing third-quarter earnings-per-share guidance, FactSet counted 72 positive outlooks and 44 negative ones. The positive share was 62%, compared with a five-year average of 40%.

FactSet expected five sectors to deliver double-digit earnings growth. It also projected index revenue growth of 12.3%, compared with the 10.9% expected on June 30. Both measures remained forecasts ahead of the reporting season.

Investment gains complicate the second-quarter comparison

The preceding quarter set an unusually high benchmark. LSEG data cited by Reuters showed S&P 500 earnings grew nearly 54% year on year in the second quarter, the strongest increase since 2021. Excluding mark-to-market gains on AI-related investments at Alphabet and Amazon, growth was about 35%, also the highest since 2021.

That distinction matters when comparing headline growth rates: investment gains materially affected the earlier quarter’s total. Reuters reported that strategists were unsure whether third-quarter growth could surpass it. The tendency for most companies to beat analysts’ estimates does not establish that this season will produce the same outcome.

Micron reports strong results alongside higher investment

Micron provides a completed company-level result alongside the index forecasts. In results published September 30, it reported fiscal fourth-quarter revenue of $54.23 billion, compared with $41.46 billion in the preceding quarter and $11.32 billion a year earlier. Quarterly GAAP net income was $37.70 billion.

Those figures cover Micron’s fiscal quarter ended September 3, rather than the calendar third quarter used in the index outlook. They illustrate one supplier’s performance and do not establish results for the semiconductor sector as a whole.

Micron reported net capital expenditures of $10.77 billion for the quarter and $27.37 billion for fiscal 2026. Chairman and chief executive Sanjay Mehrotra said the company expected a stronger fiscal 2027 and was increasing investment in technology, products and manufacturing. Those statements describe management’s expectations and plans.

Investors question how long rapid growth can last

“A concern for investors is we are kind of approaching peak earnings growth” for the current cycle, Anthony Saglimbene, chief market strategist at Ameriprise Financial, told Reuters. He linked the AI trade to continued capital spending. Upcoming results will test earnings expectations, while the duration and eventual returns of elevated AI investment remain unresolved.