It is the busiest week of the second quarter earnings season, with 175 S&P 500 companies scheduled to report. Importantly, four of the Magnificent 7 are scheduled to release earnings: Meta Platforms (META), Microsoft (MSFT), Apple (AAPL), and Amazon.com (AMZN). Beyond the big four, notable companies scheduled to report earnings include: Boeing (BA), Coca-Cola (KO), Sherwin-Williams (SHW), Procter & Gamble (PG), Starbucks (SBUX), Chevron (CVX), and ExxonMobil (XOM).
Earnings Season At A Glance
According to FactSet, 86% of S&P 500 companies are reporting earnings above consensus estimates, with 27% having released results.
Earnings Estimates Summary
When combining actual results with consensus estimates for companies yet to report, the S&P 500’s blended earnings growth rate for the quarter is 37.9% year-over-year, above the 23.3% expectation at the end of the quarter. Notably, the expected earnings growth rate for calendar year 2026 is 27.3%, while the estimated growth for 2027 is 15.3%.
Market Performance
The S&P 500 fell 0.6% last week amid weakness in the big technology companies and continued threat of hostilities with Iran. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), were particularly weak and declined by 5.7%. The week saw another bout of investor nervousness about artificial intelligence (AI) capital expenditures weighing on the mega-cap technology companies. Small-cap stocks underperformed the S&P 500.
The Magnificent 7
Because technology companies are critical drivers of earnings growth and account for a significant percentage of the S&P 500’s market capitalization, the Magnificent 7 remains the group to watch this earnings season. Another crucial driver of earnings growth this quarter is Micron Technology (MU), whose stock has soared as demand from artificial intelligence (AI) has sent earnings sharply higher.
Tesla (TSLA) reported a mixed quarter with good vehicle deliveries leading to sales growth, but increased spending on future initiatives, like robots and autonomous vehicles, weighing on the bottom line. Tesla’s stock was punished last week, falling by 17.8%.
Crucially, Alphabet (GOOGL) earnings continued to reflect AI monetization, with revenues growing by 24% year-over-year. More directly, Google Cloud revenues grew by 82%, with increasing margins. Earnings were flattered by Alphabet’s stake in Anthropic being marked to a higher value, causing the almost 300% year-over-year earnings spike. That increase in investment value is likely unsustainable, so it is better to focus on operating earnings, which grew by 30% year-over-year. The fly in the ointment for investors was a $15 billion increase in projected 2026 capital expenditures to a midpoint total of $200 billion. Capital expenditures for 2027 should be even higher.
Four of the Magnificent 7 are scheduled to report results this week: Meta Platforms (META) and Microsoft (MSFT), after the close on Wednesday, with Apple (AAPL) and Amazon.com (AMZN) after the close on Thursday.
Earnings Insights By Sector
A much better-than-expected earnings report from Alphabet (GOOGL) within the communication services sector was the primary driver of the increase in expected earnings for the quarter. According to FactSet, excluding Alphabet from the calculation, the blended earnings growth rate for the quarter would decline to 25.9% from 37.9%.
Revenue Results By Sector
Better-than-expected sales growth from multiple sectors drove expected revenue growth higher, with expectations above the end-of-quarter level, according to FactSet.
What To Watch This Week
Beyond the deluge of earnings this week, the status of hostilities with Iran and oil prices are likely to remain a focus for financial markets this week. In addition, the Federal Reserve (Fed) meets on Wednesday. While there is little chance of an interest rate hike at this meeting, markets are now pricing on a 25 basis point (0.25%) hike in September and an additional hike in December. Resilient economic growth and elevated inflation have sent 2026 rate hike odds higher, so investors will be looking for clues about the timing of any hikes.
The first reading of second-quarter economic growth comes on Thursday, with US GDP growth expected to remain resilient at 2.1% despite the Iran War and headwinds from higher energy prices.
After investors expressed their displeasure with Alphabet’s higher expected capital expenditures despite robust earnings growth, Meta Platforms (META), Microsoft (MSFT), and Amazon.com’s (AMZN) monetization and spending expectations will be under a microscope this week. Those three stocks were punished along with Alphabet last week, so the bar may not be set as high now. Apple (AAPL) benefited from not being a significant participant in the AI spending cycle.
Disclosure: The Glenview Trust Company and the author may hold the stocks mentioned in this article.
