With NVIDIA reporting actual results for Q2 on August 26, all the companies in the “Magnificent 7” have now reported earnings for the second quarter. How did the earnings reported by these seven companies perform relative to analyst expectations and year-ago results?
On June 30, the estimated earnings growth rate for the “Magnificent 7” companies for Q2 was 30.8%. Overall, 86% (6 out of 7) of the “Magnificent 7” companies reported a positive EPS surprise, compared to 86% for all S&P 500 companies. In aggregate, earnings reported by the “Magnificent 7” companies exceeded estimates by 66.2%, compared to 26.5% for all S&P 500 companies.
As a result, the “Magnificent 7” companies reported actual earnings growth of 118.5% for the second quarter, which is the highest earnings growth rate reported by these seven companies going back to at least Q4 2020 (when Tesla joined the S&P 500). On the other hand, the blended earnings growth rate for the other 493 S&P 500 companies for Q2 is 31.8%, which is the highest earnings growth rate reported by this group of companies since Q4 2021 (32.4%).
The top five contributors to earnings growth for the S&P 500 for Q2 2026 are (in order) Alphabet, Amazon.com, Micron Technology, NVIDIA, and Chevron. Thus, three of the top five contributors are “Magnificent 7” companies.
However, it should be noted that EPS reported on a GAAP basis by Alphabet and Amazon.com was used for both the earnings surprise and the earnings growth rate calculations, as the majority of analysts contributing EPS estimates to FactSet for these two companies are providing EPS estimates on a GAAP basis. Alphabet and Amazon.com historically have only reported EPS numbers on a GAAP basis.
Both Alphabet and Amazon.com reported substantial increases in other income for the second quarter due to investment gains, which were included in their (GAAP) EPS numbers. The (GAAP) EPS actual for Alphabet for Q2 included a gain of $98 billion in other income primarily due to net unrealized gains on equity securities, while the (GAAP) EPS actual for Amazon.com for Q2 included a gain of $53.4 billion in other income primarily due to investments in Anthropic.
Excluding Alphabet and Amazon.com, the earnings growth rate for the “Magnificent 7” companies falls to 43.2% from 118.5% and the earnings surprise percentage for the “Magnificent 7” companies for Q2 falls to 4.4% from 66.2%.
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.
On the other hand, EPS reported on a non-GAAP basis by NVIDIA, Micron Technology, and Chevron was used for both the earnings surprise and the earnings growth rate calculations, as the majority of analysts contributing EPS estimates to FactSet for these three companies are providing EPS estimates on a non-GAAP basis. Chevron ($6.06 vs. $6.11) and NVIDIA ($2.22 vs. $2.46) reported lower non-GAAP EPS than GAAP EPS, while Micron Technology ($25.11 vs. $24.67) reported higher non-GAAP EPS than GAAP EPS. The non-GAAP EPS reported by NVIDIA for Q2 excluded investment gains.
Looking ahead, analysts expect the other 493 S&P 500 companies to report higher earnings growth than the “Magnificent 7” companies in Q4 2026 (26.8% vs. 23.2%).
*Not in order of contribution
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