Strong earnings, higher expectations: why markets want more

Strong earnings are failing to impress equity markets because high valuations, rising AI investment and doubts about monetization have lifted expectations faster than profits.

• Companies representing just over 60% of the S&P 500 market value had reported by November 2026, with adjusted third-quarter EPS about 32% above the prior year.
• US earnings growth has exceeded 20% for three consecutive quarters and remained in double digits for eight quarters, although the acceleration has stalled.
• Alphabet and Meta faced negative share-price reactions despite strong underlying growth as investors focused on higher costs and AI risks to their business models.
• Alphabet, Amazon, Meta and Microsoft spent more than $201 billion on capital investment in the third quarter, with projected spending reaching $750 billion in 2026 and more than $1 trillion in 2027.
• About 70% of MSCI Europe companies had reported, showing aggregate EPS growth of roughly 25%, while energy, AI-related businesses and financials generated about 85% of the increase.

Takeaway: Investors should assess how AI spending will produce returns and how much future earnings growth is already priced in, while the AEX offers unusually strong exposure to the current earnings drivers through Shell, ASML and BESI, with EPS up about 90% year on year and total returns around 22% so far in 2026.