US Q2 Earnings Season Kicks Off with Unusually Bright Expectations
Written by Chris Beauchamp, Chief Market Analyst
Publication date: Tuesday 07 July 2026
A Rare Show of Optimism from Analysts
In a notable departure from typical trends, analysts have raised their second-quarter earnings forecasts ahead of the earnings season, marking a rare show of optimism. The bottom-up earnings per share estimate for the S&P 500 has increased by 3.4% from the end of March to the end of June, contrasting with the average decline of 2% observed over the past five years. This marks the largest quarterly increase since Q2 2021, indicating heightened confidence among analysts and companies guiding expectations higher.
Growth Expectations at Multi-Quarter Highs
The projected earnings growth rate for the quarter stands at 23.3%, which, if realized, would represent the second consecutive quarter of growth exceeding 20% and the seventh quarter of double-digit growth. All but one sector, healthcare, is expected to report year-on-year growth, with revenue growth anticipated at 12.2%, the strongest since Q2 2022.
Energy and Tech Lead the Pack
The energy sector has experienced the most significant earnings upgrade, with estimates soaring nearly 50% since March, primarily driven by a 45% year-on-year increase in oil prices. Interestingly, despite this earnings surge, energy stocks have underperformed, declining approximately 14.5% in price. In contrast, the technology sector has also seen substantial earnings upgrades and has outperformed in price, gaining around 29%, largely due to the semiconductor industry, which is expected to see earnings growth exceeding 100%.
Valuations are Running Warm
The forward 12-month price-to-earnings ratio for the S&P 500 is currently at 20.4, surpassing both the five-year average of 19.9 and the ten-year average of 19. This elevated valuation suggests that there is less room for error, and markets may react sharply to any earnings misses, even if they are minor. Analysts remain optimistic, projecting nearly 20% upside over the next year, although such forecasts should be approached with caution.
The Bottom Line
The current setup heading into the earnings season is robust, with growth rates and guidance trending positively. A seventh consecutive quarter of double-digit growth would be a significant achievement. The broad-based growth across ten of eleven sectors, alongside the strong performance of energy and technology, provides a solid foundation for traders. The combination of momentum and confidence suggests that those with a clear trading strategy may find rewarding opportunities in the market.