Third Quarter Earnings Strength

Broad EPS Growth Across the Spectrum

This earnings season delivered one of the strongest quarters in recent memory. The growth has been broad-based, with the S&P 500 seeing sales growth of over 8% and EPS growth above 11%.^[1] It was supported by accelerating cloud demand, operating leverage, and higher returns on years of AI and data infrastructure investment.

The most encouraging takeaway is that spending on AI and cloud infrastructure is beginning to deliver returns. Amazon’s (AMZN) AI revenue is growing at triple-digit y/y percentages, while Meta Platforms (META) Andromeda model drove a +14% increase in ad quality, pushing META to a +25% growth number in their advertising segment. As these companies grow, earnings while reinvested heavily in future capacity, and the market is being powered by a true productivity cycle that spans both technology and industrial segments.

The Mag 7: Sustained Growth, Expanding Opportunity

Even with valuations above historical averages, AI enablers and their related industrial enablers strongly lead third-quarter growth as they capture the full spectrum of today’s market leadership. Together, the top five hyperscalers as a group produced an average adjusted EPS growth rate of 26%, representing the most resilient earnings cohort in the market and the driving force behind the S&P’s, as the group represents roughly 25% of its total market capitalization.^[2]

Microsoft (MSFT) delivered another standout quarter, with EPS up 25% year-over-year as Azure revenue accelerated to 39%. The company continues to balance record capital expenditures with expanding operating margins, underscoring its leadership in enterprise AI adoption and software productivity.

Amazon (AMZN) posted EPS growth of 36%, driven by reaccelerating AWS growth at 20%, its fastest rate in years, and strong momentum in digital advertising, which rose 26%. The company’s backlog increased to $200 billion, up 22% year-over-year, signaling sustained demand for AI-driven cloud infrastructure.

Meta (META) reported an adjusted EPS growth of 22%, supported by 26% revenue growth and continued monetization strength across its platforms. Ad impressions were up 14%, price per ad up 10%, and engagement grew across all major channels, particularly video, which rose 30%. While shares sold off on higher spending guidance, the increased capex, targeted toward AI-driven recommendation systems and new ad formats, will continue to drive monetization efficiency and platform durability.

Apple (AAPL) grew EPS by 13% and revenue by 8%, marking its strongest performance in China in several years. Services revenue continues to expand at a double-digit pace, and management reaffirmed its commitment to over $500 billion in U.S. manufacturing and semiconductor investment, positioning Apple at the center of the next generation of device-level AI and smart technology.

Alphabet (GOOGL) reported EPS up 35%, with Google Cloud returning 33% growth and advertising remaining solid. The company’s efficiency initiatives helped lift margins, while AI integration across Search and YouTube continues to enhance engagement and monetization.

Collectively, these companies are projected to spend $400 billion in 2025, $600 billion in 2026, and $700 billion in 2027^[3], marking the largest coordinated private investment cycle in corporate history. This spending is already producing real growth, utilization, and higher margins across the economy. As hyperscalers raise guidance and industrial backlogs reach record highs, investors are witnessing an earnings expansion that supports long-term market resilience.

Current Hyperscaler Net Income and Free Cash Flow Chart:^[4]

The Industrial Backbone of AI

The industrial enablers of AI continue to show strength, with growth across data center construction, power management, and grid modernization reinforcing the foundation of this investment cycle. Quanta Services (PWR) reported revenue growth of over 20% year-over-year, supported by record transmission and distribution activity and continued demand for high-voltage interconnections. Backlog reached $30 billion, up 25% from last year, providing visibility well into 2026.

Vertiv (VRT) delivered one of the strongest reports in the group, with 29% total sales growth, 60% organic growth, and a 30% increase in backlog, which now stands at $9.5 billion. This acceleration reflects the growing urgency among hyperscalers to secure critical cooling and power infrastructure. Dominion Energy (D) continues to benefit from record data center demand. The company now has roughly 47 gigawatts in various stages of contracting, up 17% since December 2024, and more than 25% of its total sales are tied to data centers in Virginia, underscoring its vital role in supporting the AI and cloud expansion.

Together, these companies form the backbone of the AI buildout. Their accelerating order growth, expanding margins, and multi-year project visibility confirm that the industrial side of the market is now benefiting from the same AI-driven growth cycle that has powered the technology sector over the past year.

Expanding Power Capacity to Meet AI Demand

Rapid data center expansion and electrification have driven a surge in demand that current generation capacity cannot meet, creating an undersupply that is reshaping corporate investment priorities. The scale of response across the industry is massive. Year-to-date, there have been nearly 3,000 power-related deals totaling approximately $510 billion, highlighting how urgent the race to secure and build reliable power infrastructure has become.^[5] Two deals this week underscored the importance of power and how there is a strong need to find it and supply it.

Firstly, Eaton (ETN) made an acquisition of Boyd Thermal for $9.5 billion, its largest deal under the new CEO Paulo Ruiz and the company since the Cooper deal in 2012, which was $12 billion.  It’s the 4^th deal ETN has done in the power management segment year to date, as it wants to bolster its exposure to liquid cooling in the data center market. The data center and distributed IT equipment segment will be 17% of total sales by the end of the year, and with this acquisition, it stands to increase going forward. The reason it wants to build this business is because of its growth, which is currently $387 billion today and expected to grow to $1 trillion by 2034, a 12% CAGR. 

Earlier this year, the company bought Fibrebond Corporation, which designs and builds pre-integrated modular power enclosures used in data centers for $1.4 billion. It also acquired Resilient Power Systems, which makes transformers and applications in the EV and data center, and then Ultra PCS for $1.55 billion. 

Secondly, Vertiv (VRT), one of the largest players in liquid cooling data center infrastructure and services, made a deal with PurgeRite for $1 billion.  Details were not provided, but the deal came after a strong quarterly performance, with 29% sales growth, 60% organic growth, and 30% backlog growth, which now stands at $138 billion. The company is also working with NVIDIA to develop 800 VDC power architectures, which are designed to accelerate the deployment of next-generation AI factories.   

As these companies invest to expand capacity, improve grid efficiency, and scale next-generation cooling and transmission solutions, they are becoming essential players in the global transition from power scarcity to power innovation. This emphasizes balanced exposure across both the digital leaders driving the AI frontier and the industrial enablers powering the infrastructure behind it. This alignment across sectors marks the foundation of a synchronized and sustainable expansion that should continue to drive market leadership into 2026 and beyond.

U.S. Electric Energy Consumption Chart^[6]

Stephanie Link’s TV Schedule:

Sources:
^[1] Bloomberg, as of November 2025

^[2] Bloomberg, as of November 2025

^[3] Bloomberg, as of November 2025

^[4] FactSet, as of November 2025

^[5] Bloomberg, as of November 2025

^[6] U.S Energy Information Administration, as of May 2025

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