Research update: 9 October 2026 · Explained on 12 October. Reuters reports that analysts expect S&P 500 third-quarter earnings to rise about 31% year on year, using LSEG estimates. Roughly two-thirds of the increase is expected from technology and AI-related heavyweights including Alphabet, Amazon and Meta. These are estimates ahead of the reporting season, not completed results.
Read the earnings total in two stages
First ask whether corporate profits are growing. Then ask where the growth comes from. An aggregate measure adds businesses with very different demand, margins and capital requirements. Rapid expansion in one cluster can outweigh stagnation elsewhere. The combined result can be accurate while still concealing an uneven economy.
The reported concentration estimate therefore matters alongside the 31% growth expectation. It identifies a dependency in the earnings outlook. That dependency is not proof that the technology businesses are weak, nor that a decline is inevitable. It tells readers which assumptions deserve particular scrutiny as actual disclosures arrive.
There is also a classification issue. Technology-sector earnings and AI-related earnings are not exactly the same list. Some prominent AI spenders sit in other sectors. The Reuters account combines the technology sector with selected AI heavyweights; treating it as a pure sector breakdown would mislabel the data.
Reported profit and recurring operating progress can diverge
The same Reuters report says second-quarter S&P 500 earnings grew nearly 54%. Excluding mark-to-market gains on AI-related investments at Alphabet and Amazon, growth was approximately 35%. Both figures describe that earlier quarter on different bases. Neither should be presented as a third-quarter realised result.
Q2 earnings growth depends on the accounting basis
% year on year
| Label | Value (% year on year) |
|---|---|
| Q2 reported growth | 54 |
| Q2 excluding specified gains | 35 |
The difference is approximately 19 percentage points. It is not a statement that total earnings fell 19%, and it does not mean every company had those investment gains. The adjustment changes a growth measure by removing specified items. Readers need the denominator, the period and the nature of the adjustment to interpret the comparison correctly.
Fair-value gains can legitimately affect reported income while having a different economic character from sales generated by customers. A valuation increase in an investment is not identical to a recurring operating margin improvement. Cash-flow disclosures and the notes behind the income statement help distinguish those mechanisms.
A simple growth bridge shows what concentration means
Imagine aggregate earnings of 100 units rising to 130. If one cluster contributes 20 units of the 30-unit increase and the remaining companies contribute ten, the cluster supplies two-thirds of the growth. That says nothing by itself about its share of total earnings or its share of the index’s market value.
This is an invented calculation to clarify the language, not a reconstruction of LSEG’s company model. Growth contribution, earnings weight and market-cap weight can differ substantially. A company with a modest starting profit can make a large contribution when its profit rises quickly. A richly valued company can also carry a market weight exceeding its current earnings weight.
| Measure | Question answered |
|---|---|
| Aggregate earnings growth | How much did the combined profit change? |
| Contribution to growth | Who supplied the increase? |
| Share of earnings | Who earns the profits at the current level? |
| Share of index value | Where does investor capital sit? |
The AI spending cycle has more than one financial statement
Data-centre expansion can create revenue for chipmakers, equipment suppliers and construction providers. For the company buying the infrastructure, the same transaction can be a capital outlay. One participant’s sales growth and another participant’s investment spending are connected, but they are not interchangeable evidence of profitable end-user demand.
Readers should follow the chain from infrastructure orders to utilisation and customer revenue. A large order book can support supplier activity. The longer-term economics also depend on whether the buyer earns a sufficient return on the new capacity. That question takes time to answer and may require several reporting periods.
Capital spending and depreciation also have different timing. Cash can leave before the expense is recognised across future years. Strong current accounting earnings therefore need to be considered alongside cash generation, capital expenditure and the future depreciation burden. A single quarterly EPS number cannot describe the full investment cycle.
Why the hurdle rises after repeated strong quarters
Markets compare results with expectations, not merely with last year. If investors already expect exceptional growth, another strong quarter may be insufficient to improve their view. Guidance, margins and order durability can matter as much as the headline increase.
Suppose a hypothetical business grows profit from 100 to 150 while investors had expected 160. Profit has improved substantially, yet it has missed the embedded expectation. This example explains a possible market reaction without predicting how any named company will trade. The relevant benchmark for surprise is the expectation available before the announcement.
The reverse can happen when cautious expectations meet improving evidence. That is why forward guidance, estimate revisions and the breadth of performance need to be read together. An apparently small growth rate can carry a large positive surprise, while a very large growth rate can disappoint an optimistic market.
What Indian readers can learn from the reporting season
Global technology exposure through international funds can carry concentration that is not obvious from a fund’s geographic label. Indian IT-service firms also face their own demand and pricing conditions. A US chip supplier’s AI growth cannot be directly substituted for an Indian service company’s order book, margins or earnings.
Use the global reports as evidence about customer priorities, infrastructure spending and financing conditions. Then connect those observations to the actual revenue mix of the Indian company or fund being examined. This keeps the analysis anchored to exposure rather than relying on a shared technology theme.
The useful test over the coming weeks is whether realised earnings and cash flows support the concentrated expectations, and whether improvement spreads to more businesses. The headline estimate is a starting point. Understanding what produces it gives the reader a better way to assess the eventual results.
Read Reuters’ dated earnings analysis ↗
Cover: AI-generated editorial data-centre image. The growth-bridge and expectation examples are illustrative. All Q3 numbers in this article are forecasts as reported on 9 October.