Huge profits at tech and energy companies are masking this key trend
The corporate earnings season has begun in full force. JPMorgan Chase reported a rare bottom line miss , while Wells Fargo’s Q3 results were mixed. Citigroup earnings topped estimates, though revenue was barely above the consensus, while Goldman Sachs posted a huge beat on both the top and bottom lines. UnitedHealth , meanwhile, topped estimates and raised its full-year profit outlook . Despite the uneven start to the reporting period, FactSet data shows year-on-year S & P 500 earnings growth is still tracking at nearly 30%. However, the bulk of that expansion is expected to come from two sectors: energy and tech. Oil companies are expected to report sharp profit jumps as oil prices remain elevated due to the war in the Middle East. Tech, meanwhile, is forecast to continue raking in cash from the artificial intelligence buildout. Growth outside of those areas, however, is slowing. Strategist Savita Subramanian noted that S & P 500 earnings growth excluding tech and energy is expected to have slowed to 7% in Q3 from 12% in Q2. This earnings disparity may not be surprising to many investors. Tech and energy are by far the best-performing sectors of 2026. The former has surged 36%, and the latter has skyrocketed 49%. Problems could arise, however, from the fact that earnings expectations for both sectors are so elevated. BofA noted that chipmakers and energy companies are forecast to report earnings growth of 130% and 122%, respectively, from the year-earlier period. But if those lofty expectations aren’t met — and the rest of the market sees slowing growth — the broader market could face pressure. “Ultimately, index EPS remains highly dependent on the durability of the AI capex cycle and successful monetization, but the interplay between geopolitics, rates and Tech may be underestimated – a higher cost of capital and geopolitical bottlenecks could gum up what has so far been a mostly smooth story.,” BofA’s Subramanian said.
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