U.S. Stock Q2 Earnings Season Kicks Off with Record-High Profit Expectations
Claire Weston
All six major US banks beat estimates — Citi posted its best quarterly revenue in nearly a decade — yet stock reactions diverged sharply. With S&P 500 earnings growth expectations near 24%, the real test is whether companies can clear a bar that keeps rising.
All six banks beat — so why did some stocks fall?
JPMorgan, Bank of America, Citi, Wells Fargo, Goldman Sachs, and Morgan Stanley all topped analyst estimates. Citi delivered its best quarterly revenue in nearly a decade.
Yet the market split: Goldman rallied sharply post-earnings; JPMorgan and BofA also gained. Citi and Wells Fargo fell 5.3% and 2.7% respectively; Morgan Stanley slipped over 1%.
This means → at current elevated valuations, simply "beating" is no longer enough. The market wants to know by how much and at what quality — a bare pass can trigger a sell-off.
S&P 500 earnings growth expected near 24% — what does that number mean?
FactSet data show analysts expect S&P 500 constituents to post nearly 24% year-over-year earnings growth in Q2. If delivered, that would mark a second consecutive quarter above 20%.
This forecast was revised up from 18.8% at the start of the quarter — a mid-quarter upward revision is uncommon and signals rising confidence.
In plain terms = the bar has been raised. Companies must not only deliver strong results but clear a standard that was already lifted mid-quarter.
Wells Fargo strategist Scott Wren notes that institutional investors circulate an even higher "whisper number" — an unpublished expectation sitting above the public consensus.
Why are tech and AI capex the biggest focal point?
Barclays strategist Emmanuel Cau points out that stripping out tech and energy, the rest of the S&P 500 is expected to grow earnings by just 5% year over year.
This means → the earnings expansion is heavily concentrated in tech. Tech's performance will largely determine whether the overall season meets the mark.
Investors want two things confirmed: the outlook for AI capital spending, and signals that AI investment is translating into profitability — spending alone is not enough; the money has to earn its way back.
IBM's plunge and the heavyweight reports ahead — what signal does that send?
Outside banks, IBM released preliminary Q2 figures that missed expectations. The stock posted its largest single-day drop on record.
This reflects an extremely narrow margin for error at high valuations — miss the bar, and the punishment far exceeds historical norms.
UnitedHealth and Netflix report Thursday; Apple and Microsoft follow later this month. Put simply = whether tech giants can deliver on the earnings promises embedded in the AI narrative is the final verdict on this earnings season.
Content is for reference only, not financial advice.