FactSet reports that the expected earnings growth for S&P 500 companies in the first quarter of 2026 has risen to 13.2% from 12.8%.
This would be the sixth consecutive quarter of double‑digit earnings growth. At the same time, it is increasingly clear that the improvement is not spreading evenly across the index.
It seems that the market is receiving a strong signal about the condition of US companies, but beneath the surface the dependence on a few sectors is rising again.
Technology and Energy Bear the Revision Weight
The largest share of the improvement in expectations comes today from technology and energy. Within the technology sector alone, the expected earnings growth for the first quarter rose to 45.1% from 34.4% at the end of December, and the number of positive EPS guidance reached 33.
Energy added a second pillar to this improvement, as the expected earnings growth there rose to 8.9% from a mere 0.3%, helped by rising oil prices.
Beyond technology, energy and marginally finance, the picture is already much less clear. One can assume that the index today again benefits from a very high concentration in specific sectors, which usually means greater sensitivity to a stumble by the leaders.
Broad Revenues, Narrower Profits
At the revenue level, the picture remains more comfortable, as the entire S&P 500 is expected to show a 9.7% year‑over‑year increase versus 8.2% expected at the end of December. Importantly, all 11 sectors are expected to increase sales, led by technology, communication services and finance.
This may mean that demand in the economy is still strong enough to support revenues even where margins are under pressure.
The problem is that revenues alone do not guarantee a similarly broad improvement in profits. This is most evident in healthcare and in basic goods and cyclical consumption, where revisions have clearly worsened.
Valuations Provide Support, But Do Not Resolve Risk
The forward P/E for the S&P 500 is currently 19.8, just below the 5‑year average of 19.9, but still above the 10‑year average of 18.9. This means the market does not look extremely expensive relative to its own recent history, although it is hard to say there is a clear discount.
Thus it seems that investors are entering the earnings season with a relatively comfortable valuation, but without a large margin of error if EPS improvement turns out to be too heavily concentrated in a few segments.
The coming weeks should show whether technology and energy will maintain their role as the locomotives of the entire index. This breadth of improvement appears today to be the most important barometer of sentiment around US indices.
