LSEG Expects Tech and AI Companies to Drive Two-Thirds of S&P 500 Earnings Growth

Technology and AI-heavy companies are expected to supply about two-thirds of the S&P 500’s third-quarter earnings increase. Analysts expect overall earnings to rise about 31% from a year earlier, according to LSEG figures reported by Reuters on October 9. Those are forecasts for the third quarter of 2026, not completed results.

The reporting season is expected to begin unofficially with JPMorgan Chase and Goldman Sachs results in the week of October 12. Technology shares helped the S&P 500 reach a record high during the week of Reuters’ October 9 report.

The gains are not evenly spread

LSEG’s head of earnings and equity research, Tajinder Dhillon, identified the technology sector alongside Alphabet, Amazon and Meta Platforms as the main contributors. The two-thirds estimate measures their share of the expected earnings increase, not their share of total S&P 500 profits.

Energy provides another source of expected growth, with sector earnings forecast to rise about 115% year over year. Reuters linked that outlook to a roughly 30% increase in U.S. oil prices during the third quarter amid the ongoing U.S.-Israeli war with Iran.

The contrast is sharp elsewhere. Consumer staples and real estate have some of the weakest year-over-year earnings-growth estimates, sectors highlighted by Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.

Investment gains changed the Q2 benchmark

S&P 500 earnings grew nearly 54% year over year in the second quarter, according to LSEG data, the fastest pace since 2021. That included mark-to-market gains at Alphabet and Amazon on AI-related investments—gains reflecting changes in those investments’ value. Excluding them, growth was about 35%, still the highest since 2021 and much closer to the third-quarter forecast.

Chipmakers also show rapid growth at a slowing annual pace. U.S. semiconductor earnings are expected to rise about 136% year over year in the third quarter, Dhillon said, compared with about 158% in the second quarter.

A lot of this AI trade is built on continued capex spending, and every quarter we go, and they continue to spend, the hurdle rates get higher and the scrutiny gets larger.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, speaking to Reuters

Spending faces a higher bar

Saglimbene’s concern is whether the current cycle is approaching peak earnings growth. Capex means capital expenditure: the infrastructure spending underpinning the AI investment trade.

Nick Raich, chief executive of independent research firm Earnings Scout, sees a cooling in upward earnings-estimate revisions. He described the AI infrastructure buildout as still moving quickly, but more slowly than three months earlier.