by Chad Roope, CFA®, Chief Investment Officer
The first-quarter 2026 earnings season was exceptionally strong, reinforcing the market’s belief that artificial intelligence is becoming the primary driver of corporate profit growth. In fact, it was one of the strongest earnings quarters since the post-pandemic rebound, while also highlighting just how dependent the market has become on AI spending and mega-cap technology profitability. As the chart below illustrates, S&P 500 earnings grew approximately 28% year over year, far above the roughly 13% growth analysts expected entering the quarter. It is no surprise that the stock market has largely brushed aside economic concerns and continued pushing to new highs.
The “Magnificent 7” — Nvidia, Alphabet (Google), Apple, Microsoft, Amazon, Meta, and Tesla — were the primary engine behind this earnings strength.
Roughly 84% of companies exceeded earnings-per-share estimates, marking one of the strongest earnings beat rates in years. The largest contributor to this growth was continued AI-related spending and demand, particularly in semiconductors, cloud infrastructure, hyperscale data centers, and enterprise software. The Magnificent 7 companies posted earnings growth of approximately 63% year over year, compared to about 17% for the rest of the S&P 500.
Beyond technology, financial and industrial companies also delivered strong results, supported by higher interest rates, increased trading activity, infrastructure investment, and ongoing reshoring trends. This earnings season made it increasingly clear that AI is currently the defining force in corporate America, as it was a central theme across earnings calls and analyst commentary.
That said, some areas of weakness persist. Healthcare, lower-income consumer spending, and portions of the discretionary retail sector showed signs of pressure. This has been a feature of the current bull market, and we continue to monitor the growing concentration of market leadership among a relatively small group of AI-driven companies, as this narrowness could become a concern if it persists.
For now, however, the first quarter earnings season was a powerful reminder of the strength and resilience of corporate America, and the market’s positive reaction appears well supported by the impressive pace of earnings growth.
Sources: Factset Earnings Insight 5/21/26, BlackRock, Charles Schwab First Quarter 2026 Earnings: Feelin’ Alright 5/6/26
