During the past week, the (blended) earnings growth rate for the S&P 500 for the first quarter increased to 27.1% from 15.0%. If 27.1% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate reported by the index since Q4 2021 (32.0%). Seven sectors are now reporting double-digit earnings growth for Q1 2026, led by the Communication Services (53.2%), Information Technology (50.0%), and Consumer Discretionary (39.0%) sectors.
Given the substantial increase in the Q1 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 surprises reported by Alphabet, Amazon.com, and Meta Platforms were the largest contributors to the increase in the earnings growth rate for the S&P 500 for Q1 during the past week. Combined, these three companies accounted for 71% of the net dollar-level increase in earnings for the S&P 500 over this period.
The positive EPS surprises reported by all three companies for Q1 exceeded their 5-year averages. Alphabet reported a positive EPS surprise above 90% for Q1 ($5.11 vs. $2.68), compared to the 5-year average of 12.4% for this company. Amazon.com reported a positive EPS surprise above 70% for Q1 ($2.78 vs. $1.63), compared to the 5-year average of 29.3% for this company. Meta Platforms reported a positive EPS surprise above 56% for Q1 ($10.44 vs. $6.67), compared to the 5-year average of 4.3% for this company.
As a result, the blended earnings growth rate for the Communication Services sector (which includes Alphabet and Meta Platforms) has increased to 53.2% today from -3.8% on March 31, while the blended earnings growth rate for the Consumer Discretionary sector (which includes Amazon.com) has increased to 39.0% today from 1.7% on March 31
In addition, the blended earnings growth rate for the “Magnificent 7” companies has increased to 61.0% today from expectations for 22.4% earnings growth on March 31. Overall, 4 of the top 5 contributors to year-over-year earnings growth for the S&P 500 for Q1 2026 are now “Magnificent 7” companies: Alphabet, NVIDIA, Amazon.com, and Meta Platforms.
It is important to note that EPS reported on a GAAP basis by Alphabet, Amazon.com, and Meta Platforms 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 GAAP basis. Alphabet, Amazon.com, and Meta Platforms historically have only reported EPS numbers on a GAAP basis.
It is interesting to note that all three companies highlighted items in their Q1 earnings releases that had a positive impact on GAAP earnings for the quarter. The (GAAP) EPS actual for Alphabet for Q1 2026 included a net gain of $37.7 billion primarily due to net unrealized gains on non-marketable equity securities. The (GAAP) EPS actual for Amazon.com for Q1 2026 included pre-tax gains of $16.8 billion included in non-operating income from investments in Anthropic. The (GAAP) EPS actual for Meta Platforms for Q1 2026 included an $8.03 billion income tax benefit. Meta Platforms also stated that EPS excluding the tax benefit for the first quarter would have been $3.13 lower.
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.
*Not in order of contribution
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.