S&P 500's strongest earnings season in four years? Nearly 70% disclosed that the company's revenue exceeded expectations

The Zhitong Finance App learned that during this earnings season, the S&P 500 index is expected to achieve the largest number of companies in about four years, exceeding expectations, and US companies seem to have calmly coped with the impact of tariffs.

According to financial tracking data, up to now, nearly 70% of the companies in the index that have published financial reports have exceeded estimates for the third quarter. This is the highest rate that has exceeded expectations since the post-COVID-19 recovery in the last three months of 2021.

US corporate sales exceeded expectations by 69%, the highest in four years

US companies seem to have not been affected by tariffs so far, and have preserved profits through a combination of price increases, cost reduction and efficiency. At the same time, the amount of revenue that exceeded expectations was also close to the highest level since the post-pandemic boom period: according to Deutsche Bank strategists, the company's total revenue was 2.4% higher than expected, compared to the historical average of 0.5%.

Deutsche Bank's Bankim Chadha and Parag Thatte wrote in the report: “Historically, revenue exceeding expectations is closely related to unexpected increases in inflation, which this time may partly reflect the impact of tariffs on pricing.”

Furthermore, given that the US economy and job market readings are still strong, and the Federal Reserve will cut interest rates further, the profit outlook for 2026 is getting brighter.

The team led by Morgan Stanley strategist Michael Wilson wrote, “The earnings season has only just begun, but this may be an initial sign that revenue growth will continue until next year, which is in line with our view.” His team believes that the ratio of revenue exceeding expectations reached twice the historical level, which is a “prominent” characteristic of this earnings season.

Most Wall Street strategists believe that the strongest profit and sales growth is still concentrated in mega-cap stocks and technology stocks. However, thanks to the favorable year-on-year base effect, other industries have also achieved good profit growth. According to Deutsche Bank strategists, current profit increases in finance, real estate, materials and utilities have all reached double digits.

Even so, the general performance that exceeded expectations did not keep anyone optimistic. Rory Carvassina, capital markets strategist at the Royal Bank of Canada, believes that the current positive trend may be difficult to sustain.

“We believe earnings have laid a solid foundation for the US stock market, but it is difficult to replicate the surge in profit optimism that drove the market during the previous reporting period.” There is still a long way to go in this earnings season. Companies that account for 50% of the market value of the S&P 500 index will release earnings this week, including large artificial intelligence hyperscale companies such as Microsoft, Alphabet, and Meta platforms.

Despite this, a good start made the market sentiment optimistic, especially with encouraging news from trade negotiations, strong profits from banks and finance companies, and upward expectations from most companies.

According to J.P. Morgan strategist led by Dubravko Lakos-Bujas, about 66% of companies “exceeded expectations” in revenue and net profit based on a constant index component, compared to only 51% in the past four quarters.

They also pointed out that the 2026 earnings per share forecast had been raised 0.3% to $305.03, up 14.1% year over year. According to Lakos-Bujas and colleagues, this “means growth will accelerate above trend levels next year”.