S&P 500 Q3 Earnings Seen Up 29.6% as Big Bank Results Diverge

A record setup meets its first test

Third-quarter earnings season has opened with unusually high expectations, and the first reports suggest corporate America can still clear the bar, though not every company does. As of October 9, FactSet estimated that S&P 500 companies would report 29.6% year-over-year earnings growth for Q3 2026. That would be the third straight quarter above 25%.2 The estimate has risen since June 30, when the forecast for the quarter was 26.7%.2 Revenue expectations have also gone up. Analysts now expect 12.4% top-line growth, compared with 10.9% at the start of the quarter.2

The big banks were the first major test on October 13, and their results were mixed. Goldman Sachs and Citigroup beat estimates by wide margins. JPMorgan Chase missed, which is rare for it, and Wells Fargo beat on earnings but fell short on revenue.1113 This split is the clearest early sign that the season's huge headline growth number rests on a few powerful drivers, not on even strength across the economy.

Estimates went up, which rarely happens

The direction of the estimates matters more than their size. Analysts usually lower their earnings forecasts as a quarter goes on. Over the past five years, Q3-style estimates have fallen 2.2% on average during the quarter, and over ten years the average decline is 2.5%.1 This time, the bottom-up per-share estimate for Q3 rose 1.4% between June 30 and September 30.1 Company guidance has been even more striking. Of the 116 S&P 500 companies that issued Q3 EPS guidance, 72 issued positive guidance. That is the highest count since FactSet started tracking the measure in 2006, beating the previous record of 65 set in Q2 2021.2

That guidance comes mostly from one sector. Forty-four of the 72 companies with positive guidance are in Information Technology.2 Other reports point the same way. One analysis says technology will produce about two-thirds of the index's earnings increase this quarter.8 State Street notes that Technology, Communication Services and Consumer Discretionary together accounted for about 75% of total earnings growth in each recent quarter.3 On this reading, the optimism is real but narrow. AI chip and infrastructure demand is doing most of the work, and tech now makes up about 40% of the index and roughly a third of its estimated $800 billion in quarterly profit.14

Why the final number will likely be higher

FactSet argues that 29.6% is probably too low. Companies usually beat consensus, and their actual results then replace the lower estimates in the aggregate. Over the past ten years, that pattern has lifted the growth rate by 6.9 percentage points on average between quarter-end and the end of reporting season. Over five years the average lift is 6.4 points.2 Applying the more conservative five-year average to the September 30 estimate of 29.2% gives about 35.6% growth for Q3.2 The past four quarters suggest even more upside. Earnings have beaten estimates by 13.8% on average in that period, which would imply growth of about 43.3%.2

Published forecasts differ on the exact figure but agree on the scale. Bank of America expects 32% growth, about a 3% beat versus consensus.14 Goldman Sachs' consensus tally puts expected EPS growth at 27%, a little below FactSet's figure.9 Another summary puts expected profit growth near 31%.8 Whichever number turns out right, the index looks set for a third straight quarter of profit growth at a pace usually seen only in recoveries from recessions.9

Early results support the FactSet case so far. Of the 19 S&P 500 companies that had reported by October 9, 84% beat the mean EPS estimate, and their combined earnings came in 4.9% above expectations.2 That aggregate surprise is smaller than the recent four-quarter average, which is worth watching as the bigger reporters arrive.

Oil is a second, unstable growth driver

Tech is the structural story, and energy is the cyclical one. West Texas Intermediate crude rose about 30% during the quarter, from $69.50 to $90.42. As a result, estimated year-over-year earnings growth for the Energy sector has jumped to 121.1% from 79.3% at the end of June.2 One report links the oil spike to ongoing hostilities with Iran that are limiting tanker traffic through the Strait of Hormuz.7 Profits driven by geopolitics can reverse quickly. Energy's contribution flatters this quarter's total, but it says little about whether the earnings base will last.

Margins also call for some caution. FactSet's estimated net profit margin for Q3 is 15.0%. That is well above the 13.0% of a year ago and the 12.6% five-year average, but below the previous quarter's 17.0%.2 One analysis points out that earnings growth of about 29.5% on revenue growth of about 12.3% means profits are expanding more than twice as fast as sales. Margin expansion is therefore doing much of the work, and some of that comes from investment gains tied to AI.6

Banks: trading desks won, lenders less so

Tuesday's bank results showed the same uneven pattern. Goldman was the clear winner. It earned $17.01 per share on $18.68 billion in net revenue, and equities trading revenue jumped 72% from a year earlier to $6.44 billion.1317 Net income rose 29% to $5.29 billion.18 Consensus figures differ by source. Investing.com put the expected EPS at $13.09, while an earlier Reuters figure was $12.44. Revenue estimates ranged from $16.71 billion to $16.86 billion.1315 The beat was large against any of them.

Citigroup also beat clearly. It earned $2.85 per share against an estimate of $2.65, on $23.8 billion in revenue, an 8% increase from a year earlier.12 Its quarterly profit rose 40%, helped by its best third quarter in fixed-income trading in at least a decade.1712

JPMorgan was the outlier. It reported net income of $15.3 billion, or $5.57 per share, up from $5.07 a year earlier but below the consensus of about $5.90 to $5.93.1118 Some outlets report the adjusted figure of $5.75, which excludes $658 million in net securities losses. Even that number missed.1113 Fixed-income trading came in at $5.4 billion, about $550 million below the StreetAccount estimate, and expenses grew faster than revenue.11 Revenue of $50.17 billion also missed the $51.23 billion forecast.13 The bank had beaten EPS estimates in 16 of the previous 20 quarters, so this result stands out.11 Lending itself looked healthy, though. Net interest income rose 12.8% to about $27.04 billion, and average loans grew 10% year over year.16 JPMorgan also raised its 2026 net interest income guidance.15

Wells Fargo earned $1.87 per share, just above the $1.84 consensus. Revenue of $21.87 billion fell about 2% short of forecasts, and the shares dropped about 3%.1315

Beats alone may not lift stocks

The stock moves may be the most important early signal. The S&P 500 finished near flat on bank day. Goldman's shares jumped more than 4% before the open but closed down 0.2%.15 Citi shares slipped despite its beat.11 Reports on the session's trading diverge in their details, but the overall picture is consistent: strong numbers were met with caution. Bank of America has warned that after two quarters of large beats, healthy beats are now expected and may not be enough to push stocks higher.14

Valuations leave some room but not much. The forward 12-month P/E is 19.1. That is below the five-year average of 19.8 and below the 20.4 recorded at the end of June, as rising rates have pulled multiples down even while earnings estimates climbed.214 Bank executives were upbeat about consumer spending. They also warned that higher rates, inflation, oil prices and geopolitics could weigh on results ahead.1718

Outlook

We think the evidence favors the optimists on the numbers and the skeptics on what they mean for stocks. Q3 growth will very likely end well above the current 29.6%, and a figure in the mid-30s looks like a reasonable expectation.2 The quality of that growth is the open question. It depends heavily on AI-related tech, on an oil spike driven by conflict, and on trading desks that thrive on volatility. Interest-sensitive lenders are posting steadier but less impressive results.1613 TSMC's report and the large-cap tech results that follow will matter more than the banks. Investors will look closely at 2027 guidance to judge whether this pace of profit growth can last.14