S&P 500 Earnings Soar 51%, Goldman Sees Temporary Boosts Fading

The S&P 500 companies have experienced an unusual surge in earnings per share (EPS) growth, jumping by 51% year-over-year in Q2 2026. This growth rate has only been surpassed during post-recession rebounds in 2010 and 2021.

Goldman Sachs attributes this anomaly to three temporary factors: the AI investment boom, chip margins, and investment gains. The AI investment boom is driving significant spending by major technology companies, with Amazon (AMZN), Meta (META), Microsoft (MSFT), and Alphabet (GOOGL) expected to spend around $800 billion on capital expenditures this year.

According to Goldman, nearly half of S&P 500 EPS growth can be attributed to the AI investment boom. However, the firm expects this boost to fade as spending growth slows down and depreciation costs rise. Additionally, semiconductor profits are also contributing significantly, with memory companies enjoying gross margins near 80%, twice their historical average.

Goldman estimates that higher chip margins explain about one-quarter of semiconductor earnings growth this year. If overall chip gross margins fall from around 70% to their 15-year average of 55%, Goldman expects S&P 500 earnings could fall by about 10%.