Earnings Momentum Builds Beneath the Surface

EPS Revisions Signal Accelerating Growth

While headlines over the past several weeks have been dominated by geopolitical uncertainty, the fundamental backdrop of the market is quietly improving. S&P 500 earnings estimates now point to $323.96 in EPS for 2026, representing a +20% year-over-year increase.¹ This revision cycle marks a shift from earlier periods where earnings expectations lagged price performance. Today, fundamentals are catching up, and even leading, suggesting a healthier and more sustainable equity rally to follow the recently announced ceasefire with Iran.

Leadership: Tech and Energy Driving Revisions

The upward revision cycle is primarily led by the technology and energy sectors, seeing roughly an +8.6% and +8.0% increase since January 1 in expected earnings for 2026,² reflecting both strong demand trends and favorable pricing dynamics. Technology’s pace of EPS growth is backed by a continuation of AI-related demand and infrastructure buildout we saw in 2025. This can be seen with a concentration of revisions for semiconductors, with the sector experiencing a +42% year-over-year increase in earnings.³ While semis make up around 20% of earnings revisions, other aspects of technology are seeing benefit with hardware and industrials experiencing a +12% and +11% increase in earnings YTD.⁴ Along with increasing demand for AI compute, memory, and data infrastructure, Energy has experienced meaningful EPS revisions due to ongoing supply constraints. Even despite the current Iranian ceasefire agreement, the energy sector continues to see a +27.5% increase year over year in earnings for 2026.⁵

Beyond these leaders in revisions, the broader earnings picture has been improving. Revenue growth across the index is expected to approach 9.7%, the strongest pace since 2022, with multiple sectors contributing to top-line expansion.⁶ Importantly, positive earnings guidance is outpacing negative guidance, signaling growing corporate confidence. This suggests that earlier conservatism in estimates is now being unwound, as companies demonstrate stronger-than-expected demand and margin resilience. Even in the face of rising input costs, corporations are maintaining profitability through pricing power and operating leverage. This dynamic is critical in sustaining the current pace of earnings growth.

Positioning for the Next Leg Higher

The implications of rising EPS estimates are significant. Markets that were previously driven by liquidity and multiple expansion are now increasingly supported by fundamental earnings growth. This shift is particularly important given the current macro backdrop as geopolitical risks and rate cuts delays could constrain valuation expansion. However, 20% earnings growth provides a powerful offset, allowing equities to advance even in a more challenging policy environment. The current environment favors exposure to sectors and companies demonstrating strong estimate momentum, particularly those tied to AI, infrastructure buildout, and commodity strength. While it is important to follow geopolitical developments like the Iran War, the underlying earnings trajectory suggests the market continues to be grounded in real, measurable improvements in corporate profitability.

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Sources:

1. Bloomberg, as of April 8, 2026 ↩︎
2. FactSet Insight, as of April 2, 2026 ↩︎
3. Bloomberg, as of April 8, 2026 ↩︎
4. UBS Analyst Note, as of March 31, 2026 ↩︎
5. Bloomberg, as of April 8, 2026 ↩︎
6. Mizuho Analyst Note: as of April 8, 2026 ↩︎

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