Q3 2026 Earnings Season: Banks Beat as Surprise Margins Shrink

A strong start that left investors unconvinced

Third-quarter reporting season started this month the way strategists expected. Most companies beat their forecasts. What stands out is how small the beats have been, and how often share prices fell anyway.

The reports filed on PR Newswire's earnings wire during the week of October 12 included banks, asset managers, REITs and industrial firms. BNY, Bank of America, Nordea, Cohen & Steers and First Financial Bankshares all released third-quarter results on October 15 alone.1 FactSet's tally as of October 16 gives the overall picture. About 9% of S&P 500 companies had reported, and 84% of them beat earnings estimates. That is above the five-year average of 78%.12 On aggregate, though, earnings came in only 2.6% above estimates, well below the five-year average surprise of 7.5%.12

That gap is the main story of the season so far. Companies are clearing the bar, but by less than usual, and the bar was set unusually high.

Why the bar was so high

Analysts normally cut their estimates as a quarter goes on. This time they raised them. FactSet found that per-share estimates for the third quarter rose 1.4% between June 30 and September 30. Over the past five years, estimates have fallen by an average of 2.2% during the quarter.11 Company guidance pointed the same way. Of 116 S&P 500 companies that gave third-quarter EPS guidance, 72 were positive. That is 62%, against a five-year average of 40%.11

Those upgrades lifted the expected growth rate for the index to 29.5% at the start of October, up from 26.7% at the end of June. Expected revenue growth rose to 12.3%.11 State Street pointed out that if this holds, it would be the first time since 2008 that the index posted three straight quarters of earnings growth above 25% along with eight straight quarters of double-digit growth.14 Companies had also beaten estimates by record margins in the first half: 16.8% in the first quarter and 26.0% in the second.14 Investors were used to blowout beats.

After the first week of reports, FactSet's blended growth rate had dipped slightly to 29.0%. Downward revisions in health care were the main reason, while blended revenue growth edged up to 12.6%.12 Health care was the only sector reporting a year-over-year earnings decline at that point.12

The growth is also concentrated. FactSet's StreetAccount preview said semiconductors alone account for more than 40% of S&P 500 earnings growth. Energy is expected to grow earnings by more than 120%, helped by refiners, while financials were expected to grow just 3%.15 Zacks figures cited in another preview show that index growth drops sharply once energy and tech are taken out.17 Rising oil prices are part of the energy story. Forbes linked them to continued disruption of tanker traffic through the Strait of Hormuz.13

The banks: one blowout, several close calls

Big banks report first, and their results this quarter were mixed. One tally of the six largest US lenders showed Goldman Sachs beating profit estimates by about 32%. Citigroup beat by 7.1%, Morgan Stanley by 3.4% and Wells Fargo by 1.1%. Bank of America missed by 1.8% and JPMorgan by 3.0%.27

Goldman was the clear standout. It earned $17.01 per diluted share, up from $12.25 a year earlier, on net revenue of $18.68 billion.21 Revenue rose 23% from the prior year, and equities trading revenue jumped 72% to $6.44 billion.26 Management said it was the firm's second-highest quarterly revenue ever. It also said EPS would have been roughly $18 without a $450 million accelerated charitable contribution.23

Outlets disagreed on the size of Goldman's beat because they used different consensus figures. Quartz cited a FactSet consensus of $12.86 per share.21 Investing.com used $13.09.23 Beinsure cited an LSEG figure of $13.02.32 Yahoo Finance put it at $13.65.35 The beat was large under any of these numbers. Still, the range shows that "beat by X%" figures depend on which estimate provider is used, and readers should treat them with some caution.

Morgan Stanley shows the other side of the season. It earned $3.03 per share on revenue of $20.34 billion, above forecasts on both. Its shares still fell almost 3% in premarket trading.22 Tickeron's account gives a likely reason. Fixed-income trading revenue fell 7% and missed expectations by about $260 million. Investment banking revenue also came in below estimates as a slower IPO market weighed on equity underwriting.28 Equities and wealth management made the headline numbers look good, but the weaker businesses underneath drew the market's attention.

JPMorgan missed on both lines. It reported $5.75 per share against a $5.90 consensus and revenue of $50.9 billion against $51.26 billion expected.31 Wells Fargo shares fell about 3% after its revenue disappointed.35 Further down the list, U.S. Bancorp beat EPS estimates by two cents, while revenue came in slightly below consensus. It reported record net revenue and raised its full-year guidance.25

Price targets moved, but not by much

Analysts mostly made small changes to their price targets. After JPMorgan's miss, Baird raised its target from $305 to $312 and Morgan Stanley's analyst went from $370 to $377. Both kept neutral-equivalent ratings.31 The bank's preliminary 2027 net interest income outlook of about $107 billion, excluding Markets, appears to have outweighed the quarterly shortfall.31

Goldman's case is more telling. Even after a beat of roughly 30%, JPMorgan's analysts raised their Goldman target only from $955 to $970 and kept a neutral rating.34 RBC cut its target from $1,220 to $1,010 around the same time.33 MarketBeat's consensus remains "Hold," with an average target of about $1,051 and a range of $920 to $1,300.34 Before the report, Goldman had bought back stock at an average of $1,048.73 per share, above where the shares now trade.39 Its investment banking backlog also slipped from the second quarter, and its CET1 capital ratio fell to 12.4%.39

One strategist quoted after the results warned that trading revenue could cool once investors finish repositioning. The same strategist noted that global M&A activity fell 41% from the prior quarter.36 Our reading is that analysts see Goldman's trading gains as tied to market volatility and don't expect them to last at this level, so they are not building them into long-term valuations.

Outside the banks

Other reports support the same picture: steady revenue growth, with profit growth depending on the business mix. Johnson & Johnson beat with adjusted EPS of $2.59 against $2.53 expected. Revenue rose 5.9% to $25.4 billion, and the company raised full-year guidance to $11.05–$11.15 per share.24 Its revenue beat was only about $20 million, so the guidance increase mattered more than the beat itself.24

TSMC was the strongest AI-related report. Revenue rose 41.2% to $46.72 billion and EPS per ADR jumped 68.7%, both above consensus. Gross, operating and net margins did narrow from the prior quarter.29 BlackRock beat EPS estimates by about 10.7%, but its revenue beat was small. Growth in assets under management to $15.49 trillion did most of the work.30

Among companies posting results on PR Newswire, ManpowerGroup grew revenue 4% to $4.8 billion and nearly doubled diluted EPS to $0.71. Its CEO called 2026 an "inflection point."3 Prologis grew total revenue to $2.39 billion from $2.21 billion. It also cut its full-year net earnings guidance and narrowed its core FFO range.4 First Financial Bankshares earned $74.31 million, up from $52.27 million a year earlier.5 M&T Bank's diluted EPS of $5.04 was below the prior quarter's $5.32.10 Abroad, Ericsson's net income fell 49% because last year's quarter included a divestment gain, even though organic sales grew 7%.2

What it means

Our reading is that the season is turning into a test of whether earnings growth is lasting, not whether companies can beat estimates. Most companies are still beating. But surprise margins are narrowing, analysts are making only small target changes, and shares are falling on beats. Together, those signals suggest much of the good news was already priced in. The forward P/E for the S&P 500 stands at 19.0, slightly below its 10-year average.12 That leaves some room for upside, but only if the next wave of results backs up the growth estimates.

That test comes soon. Several of the megacap tech companies report on October 28–29, the same days as the Federal Reserve meeting.1419 With AI infrastructure behind more than half of index earnings growth by StreetAccount's count, those reports matter more for the index than the bank results did.15 If growth narrows further, the 29% headline growth rate will depend on a small group of companies.