Wall Street Has Set a Sky-high Bar for Companies to Clear This Earnings Season. They Just Might Pull it Off.

Here's one strategist's guide to what investors should expect for what's shaping up to be a blockbuster earnings season

S&P 500 earnings are expected to rise about 22% in the second quarter from a year earlier

Analysts have set a sky-high bar for second-quarter earnings. However, Piper Sandler thinks corporate America can still clear it.

S&P 500 SPX earnings are expected to rise about 22% in the second quarter from a year earlier, after first-quarter profits grew nearly 21%. In the first quarter, six of the index's 11 sectors posted double-digit growth and more than 80% of companies beat estimates. For the full year, analysts now expect S&P 500 earnings to grow about 24% over 2025, more than triple the market's long-term average annual growth of 7.5%, according to Piper Sandler.

Whether companies can meet this lofty bar matters more than usual, because earnings have carried much of this year's stock-market rally, pushing the S&P 500 into record territory even as its forward price-to-earnings multiple has contracted.

"Earnings growth has been the primary driver of market performance this year," wrote a Piper Sandler team led by chief investment strategist Michael Kantrowitz.

Through July 10, the S&P 500 had gained 10.7% for the year. Piper Sandler's analysts estimated that rising earnings contributed about 18.5 percentage points to that return, while a shrinking price-to-earnings multiple subtracted nearly 8 percentage points. Had the index's valuation simply held steady, its gain would be approaching 20%. Mid- and small-cap stocks, by contrast, have enjoyed both earnings growth and expanding multiples.

Despite the lofty expectations, Piper Sandler expect the earnings strength to persist through early 2027. Kantrowitz and his team highlighted several possible drivers in their report.

First, analysts are raising their forecasts rather than cutting them. Earnings estimates typically begin the year at optimistic levels and drift lower as the months pass. This year, estimates for 2026 have kept climbing, a pattern the firm said has historically appeared mainly when the economy was emerging from a deep slowdown or recession.

Leading economic indicators also suggest that the earnings boom will continue. The proportion of S&P 1500 companies receiving upward earnings revisions has historically moved closely with the Institute for Supply Management's manufacturing index, and both measures have recently turned higher, the analysts noted.

Piper Sandler saw room for that improvement to continue. The firm compared the ISM manufacturing new-orders index with an inverted measure of the two-year change in the 10-year Treasury yield BX:TMUBMUSD10Y, advanced by 18 months. As shown in the chart below, that interest-rate signal points toward stronger new orders into 2027. A sustained manufacturing recovery, in turn, could keep earnings revisions moving higher and profit growth broadening.

Companies themselves have also done little to tamp down expectations. The ratio of negative to positive earnings preannouncements is near multiyear lows and well below its long-term average for both large- and small-cap companies. In other words, relatively few executives have warned that Wall Street's estimates are unrealistic. While that doesn't guarantee another round of widespread beats, it removed one of the most obvious warning signs heading into reporting season.

What's more, while technology remained central to the earnings boom, the bull case doesn't rest solely on megacap tech or AI. While tech now accounts for nearly 34% of S&P 500 profits - certainly an outsize share - companies across the board are seeing a pickup.

About 78% of S&P 1500 companies have posted positive earnings growth this year, well above historical norms. Even excluding tech, expected S&P 500 earnings growth over the next 12 months remains near multiyear highs.

Within the index, energy and tech carried the heaviest second-quarter expectations: Analysts see energy-sector profits more than doubling from a year earlier, while tech earnings are projected to climb 61%. Reporting activity ramps up in late July, with the busiest stretch of the season expected around July 29.

-Frances Yue

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July 14, 2026 17:03 ET (21:03 GMT)

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