During the past week, the (blended) earnings growth rate for the S&P 500 for the second quarter increased to 37.9% from 24.8%. If 37.9% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate reported by the index since Q3 2021 (40.3%). Seven sectors are now reporting double-digit earnings growth for Q2 2026, led by the Energy (128.2%), Communication Services (112.4%), and Information Technology (64.6%) sectors.
Given the substantial increase in the Q2 earnings growth for the S&P 500 during the past week, which companies were the largest contributors to this increase?
At the company level, the positive EPS surprise reported by Alphabet ($9.11 vs. $2.88) was the largest contributor to the increase in the Q2 earnings growth rate for the S&P 500 during the past week. This company alone accounted for 92% of the net dollar-level increase in earnings for the S&P 500 over this period.
However, it should be noted that EPS reported on a GAAP basis by Alphabet was used for both the earnings surprise and the earnings growth rate calculations, as the majority of analysts contributing EPS estimates to FactSet for Alphabet are providing EPS estimates on a GAAP basis for this company. Historically, Alphabet has only reported EPS numbers on a GAAP basis.
While all publicly traded U.S companies report EPS on a GAAP (generally accepted accounting principles) basis, many U.S. companies also choose to report EPS on a non-GAAP basis. There are mixed opinions in the market about the use of non-GAAP EPS. Supporters of the practice argue that it provides the market with a more accurate picture of earnings from the day-to-day operations of companies, as items that companies deem to be one-time events or nonoperating in nature are typically excluded from the non-GAAP EPS numbers. Critics of the practice argue that there is no industry-standard definition of non-GAAP EPS, and companies can take advantage of the lack of standards to exclude items that (more often than not) have a negative impact on earnings to boost non-GAAP EPS.
It is important to note that the (GAAP) EPS actual for Alphabet for Q2 2026 included a net gain of $98.0 billion primarily due to net unrealized gains on equity securities. Some of the analysts covering Alphabet did state in their research notes that excluding this gain, Alphabet would have reported actual EPS of $2.85 for the quarter. However, as previously stated, the vast majority of analysts providing EPS estimates to FactSet used the (GAAP) actual EPS of $9.11 including the gain as the comparable number to their estimates.
As a result, Alphabet is now the largest contributor to year-over-year earnings growth for the S&P 500 for Q2 2026. If Alphabet were excluded, the blended earnings growth rate for the S&P 500 for Q2 2026 would fall to 25.9% from 37.9%. Thus, even excluding Alphabet, the S&P 500 would still be reporting its 2nd consecutive quarter of year-over-year earnings growth above 20% and 7th consecutive quarter of double-digit earnings growth.
Last quarter, Alphabet, Amazon.com, and Meta Platforms all reported GAAP EPS for Q1 2026 that included significant gains that boosted the overall earnings growth rate for the S&P 500 for the first quarter. Please see this article for more details: Three “Magnificent 7” Companies Push S&P 500 Earnings Growth to Highest Level Since 2021.
Both Amazon.com and Meta platforms are scheduled to report earnings for Q2 2026 this week.
*Not in order of contribution
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