S&P 500 Profits Set to Surge More Than 30% in Q3 With AI Giants Dominating Growth

U.S. corporate profits are heading for another blockbuster quarter, but much of Wall Street’s anticipated earnings growth is coming from the technology giants riding the artificial intelligence boom.

Analysts expect earnings for companies in the S&P 500 to jump approximately 31% in the third quarter compared with a year earlier. Nearly two-thirds of that projected increase is expected to come from the technology sector and AI-focused companies, including Alphabet, Amazon and Meta Platforms.

However, there is a growing concern among investors about what happens to the broader market if the AI earnings boom begins to slow. Technology stocks helped push the S&P 500 to a record high this week, just days before the third-quarter earnings season is expected to begin with reports from major financial institutions, including JPMorgan Chase and Goldman Sachs.

Investors have poured money into businesses developing AI models, building the infrastructure needed to run them and incorporating the technology into their existing products and services.

The technology sector is not the only industry expected to report substantial profit growth.

Energy companies are projected to post a roughly 115% increase in third-quarter earnings compared with the same period last year, according to Reuters. The gains reflect sharply higher oil prices amid the ongoing U.S.-Israeli war with Iran, which helped push American crude prices approximately 30% higher during the quarter.

But the picture is considerably less encouraging outside technology and energy. Consumer staples and real estate are among the sectors expected to report the weakest year-over-year earnings growth, highlighting the uneven distribution of corporate America’s anticipated profit gains.

“Almost as telling is if you look at the sectors that are not related to AI at all,” Samana said, pointing specifically to those industries. The third-quarter projections also follow an extraordinary second quarter that may prove difficult to surpass.

S&P 500 earnings surged nearly 54% from a year earlier during the April-to-June period, the strongest growth since 2021, according to LSEG. That figure, however, was inflated by gains recorded by Alphabet and Amazon on investments tied to artificial intelligence. Excluding those mark-to-market gains, which reflect changes in the assessed value of investments, earnings growth was approximately 35%.