Year-over-year EPS growth has doubled the 4% consensus expected at the start of reporting. 82% of companies in the S&P 500 have beaten EPS estimates, relative to a post-pandemic average of 78%. That strength has been reflected in guidance momentum: nearly 60% of companies providing full-year guidance have raised it — almost double the rate in Q1.
Earnings beats have been tolerated while misses have been punished. Top and bottom-line misses have been punished by an average sell-off of 10%, more than twice the historical decline.2 The skew is asymmetric: companies that beat expectations rose by just 1.5%, in line with historical averages. The lopsided reactions likely reflect the lower bar coming into the quarter.
Breadth has been strong. 75% of companies beat on EPS. Even so, tech and tech-adjacent names continue to drive the lion’s share of growth. The Magnificent 7 cohort grew earnings 26% year-over-year versus just 4% for the rest of index.
Companies remain committed to AI capital expenditure (capex). Big tech guidance pointed to continued — and in many places increased — AI investment in the coming quarters. Capital expenditures for the largest four hyperscalers3 are forecasted to grow by over 43% in 2025, versus just 4% for the rest of the index.
