View from the markets: The earnings season has been good, but is it good enough?

Strong third-quarter earnings growth is less reassuring than it appears because technology companies are falling short of unusually high expectations, while medium-term earnings prospects remain supportive.

• About half of the S&P 500 and MSCI Europe had reported by 30 October 2026, with profits up 29% year on year in the S&P 500 and 23% in Europe, according to FactSet.
• Earnings beats were only 1% for the S&P 500 and 2% for Europe, below the usual 3–4% range and weaker than in recent quarters.
• Technology was the main source of disappointment: the earnings surprise was -4% for the Nasdaq 100 and -9% for emerging-market technology stocks.
• Consensus expects 2027 earnings growth of 35% for the Nasdaq 100 and 39% for emerging-market technology stocks; even modestly lower results could still support index gains if valuations remain stable.
• Higher energy prices helped the Russell Value and MSCI Europe, while most non-technology sectors delivered double-digit earnings growth; autos remained a drag on consumer discretionary.
• Further broadening of earnings growth depends partly on AI adoption, with insurers reportedly using micro-expression recognition to reduce claims-review times and credit losses, while high AI bills are pressuring CFOs and hyperscalers to demonstrate returns on capital expenditure.

Takeaway: Short-term equity performance may remain vulnerable to technology earnings misses, but the medium-term outlook is still constructive if strong expected growth materialises, AI productivity gains spread beyond technology and valuations do not rise materially.