Earnings season’s nearly over. Except for Nvidia. Which is about like saying football season’s over except for the Super Bowl.
As some of you may recall, expectations were elevated for corporate America headed in. Consensus expected 8% YoY profit growth for the S&P in aggregate, the second-highest pre-season bar since 2021, when the C-suite was hurdling pandemic comps.
Spoiler alert: Management cleared the bar. With nearly three-quarters of market cap on the books, EPS growth stands at 12% led by, not surprisingly, Comms Services, Tech and Financials.
The figure above, from Goldman, gives you some context.
If your question is, “Wait, are you saying corporate America clears the pre-season bar every, single quarter?” the answer’s “yes.”
If your next question is whether there’s something farcical about that considering bottom-up consensus is just the collective wisdom of company analysts who take their cues almost exclusively from management, the answer’s “yes” again.
If your final question is whether that renders this whole enterprise a charade, and a transparently silly one at that, the answer’s… well, you get the idea.
The overall beat wasn’t just a function of a few big names, by the way. As Goldman’s David Kostin pointed out, the median S&P 500 company notched 7% EPS growth, better than the 6% analysts expected.
One of (and after the DeepSeek shock, the) most pressing questions prior to mega-cap results revolved around capex plans in light of the AI arms race. The figures below show you the respective guides for the current year, and also estimates for the out-year.
The hyper-scalers plan to spend $331 billion this year, up 31% from 2024, and more than $363 billion in 2026.
Kostin reiterated his view that “US exceptionalism” is in no small part attributable to American companies’ penchant for growth investment and corporate America’s adeptness at getting a better return on that investment versus ex-US corporates.
American companies — and in the context of capex growth rates, that really just means the Mag7 — need to sustain both investment and ROI at elevated levels going forward for US equity outperformance to continue, Kostin said.
Earnings growth and expectations for such to continue, even accelerate, seem strong argument for equity bulls; while capex plans & expectations seem likewise – specifically for semi’s and particularly semi-equipment.
That being said, the Trusk (DonElon?) administration presents a much greater than usual left-tail risk (tthink – stegosaurus-tail order of magnitude!)…
Trusk. That is the best.
Annual estimates for SP500 have been declining over the last several months. 2025 EPS from 278 to 270, 2026 EPS from 318 to 307. Quarterly, 1Q25 EPS from 64 to 61 etc.