Beyond the AI boom: A broader earnings story

The current earnings boom is becoming broader, more profitable and more durable than an AI-led rally concentrated in a few technology companies.

• US second-quarter earnings growth is tracking at approximately 50%, with 86% of S&P 500 companies beating expectations; excluding Alphabet and Amazon, growth falls from 50.4% to 32.0% but remains historically strong.
• European STOXX 600 earnings are growing by more than 20%, or 22.4% according to estimates, and by 11.5% excluding Energy; eight of ten sectors are contributing positively.
• Information Technology earnings in the US are rising by roughly 70% year on year and revenues by close to 36%, while AI-related revenue has exceeded data-centre and hardware depreciation costs for two consecutive quarters.
• Earnings growth is spreading beyond technology: ten of eleven US sectors are positive, with Financials, Industrials and Materials expected to grow earnings by approximately 24%, 20% and 39%, respectively, while Energy posts triple-digit growth.
• S&P 500 net margins have reached 16.9%, versus 14.8% last quarter, 12.9% a year ago and a five-year average of 12.4%; eight sectors show year-on-year improvement and nine exceed their five-year averages.

Takeaway: Investors should view the cycle as a broader profit expansion supported by technology investment, improving margins, resilient consumption and healthy balance sheets, although its durability depends on constructive guidance and continued macroeconomic expansion.