Record market rally faces earnings test as AI spending surges

Record highs in U.S. stocks have left companies with a sharper earnings test: not just to grow, but to beat expectations by enough to justify prices already built for success. The second-quarter reporting season opens the week of July 13, with JPMorgan Chase, Goldman Sachs, Netflix and Johnson & Johnson among the names likely to set the tone.

For the quarter that just ended, S&P 500 companies are expected to report aggregate earnings growth of 23.4% from a year earlier, far above the 15.2% forecast that was in place when 2026 began. FactSet’s July 2 preview put the growth rate at 23.3% and said the index would post a second straight quarter above 20% if that estimate holds. It also showed analysts raising second-quarter earnings estimates by 3.4% between March 31 and June 30, a rare move in a period when forecasts usually drift lower.

That surge in expectations is tied to the same force that has powered much of the market’s optimism: artificial intelligence spending. Deloitte said July 1 that AI-related investment should remain a key support for U.S. growth and lifted its 2026 fixed business investment forecast to 6.1% from 4%. Goldman Sachs is more aggressive still, projecting 2026 S&P 500 earnings per share of $340, a 24% increase, with AI infrastructure investment accounting for about half of that growth.

The problem for investors is that strong results may no longer be enough. Reuters pointed to Samsung Electronics as a recent example of good earnings followed by weakness in semiconductors, a reminder that stocks can fall even when profits rise if guidance fails to excite traders. That is the backdrop for banks and other market-sensitive companies now set to report first, with finance a major contributor to S&P 500 earnings and each update likely to influence whether the quarter is treated as proof of durable profit growth or just another round of upgraded hopes.

Valuation only heightens the pressure. A July 9 snapshot put the S&P 500 at about 27.1 times trailing earnings, while another market measure put the forward P/E near 20. Even as the index has climbed to fresh highs, the market still needs earnings to do more than match forecasts. FactSet now sees third-quarter earnings growth of 26.8%, fourth-quarter growth of 24.4% and full-year 2026 earnings growth of 24.1%, leaving little room for disappointment if companies merely meet the already elevated bar.