Corporate Fundamentals Are Strong, but Consumer Resilience May Weaken in the Second Half

Overview

The report extracts macro signals from earnings reports of S&P 500 companies that have disclosed results, management commentary, analyst forecasts, and alternative data. Its core conclusion is that corporate operating activity was strong and consumers remained healthy in the second quarter, but this strength was partly supported by tariff rebates. As rebate effects fade and real cash flow stagnates, consumption growth may slow materially in the second half of 2026.

Core views

Corporate earnings and real revenue remained strong in the second quarter, with revenue growth showing some breadth, although large technology companies made a significant contribution to overall performance.Sales at consumer-related companies and management assessments of consumer sentiment both improved to multiyear highs, but high-frequency consumption indicators weakened notably in July.Tariff rebates eased some cost pressure and supported marketing, price cuts, and buybacks, but they are one-time benefits; beneficiary industries also face elevated price pressure and downward revisions to margin expectations.AI discussions are shifting from broad narratives toward specific applications and costs, but quantifiable earnings contributions remain limited; inference costs currently account for a low share of S&P 500 revenue, while recent spending growth has accelerated materially.

Analysis framework

Cross-validates earnings-season fundamentals, inflation-adjusted revenue, analyst forward-margin expectations, earnings-call text sentiment and thematic statistics, official statistics, and alternative consumer data.

Methodology notes

• Macro and Corporate FundamentalsReal Revenue Metric Excluding Energy

  Price-adjusts S&P 500 revenue excluding the energy sector using the GDP deflator.

  Used to reduce the impact of energy-price volatility and industry-specific factors, and to measure economic activity through real corporate revenue.

• Text AnalysisEarnings-Call Consumer Sentiment Indicator

  Quantifies management commentary on consumer conditions during earnings calls.

  Used to track high-frequency corporate assessments of consumer health and cross-check them against official and alternative consumption data.

• Earnings ExpectationsForward Margin Expectation Revisions

  Treats analyst revisions to forward margin estimates as a proxy for changes in corporate guidance.

  Used to observe how cost and price pressures are transmitted into sector earnings expectations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• S&P 500

  Object of macroeconomic and corporate earnings observation

  Strengths

  Real revenue and earnings excluding certain one-time effects continue to post strong growth.

  Weaknesses

  Overall growth is driven by large technology companies, while real revenue growth for typical and non-technology companies is lower.

  Comparison

  The median S&P 500 company's real revenue grew 4.2% over the past year; the median company excluding the technology sector grew 3.0%.

  Risks

  Consumer slowdown, higher oil prices, downward revisions to sector margin expectations, and fading one-time rebate effects.

• US Consumer Discretionary Sector

  A key beneficiary of consumer resilience and tariff rebates, as well as a sector with meaningful risk exposure

  Strengths

  Median S&P 500 consumer discretionary company sales grew 5.9% year over year, with improved demand across consumer income groups.

  Weaknesses

  Part of the growth relies on short-term support from tariff rebates.

  Comparison

  Sales growth exceeded the 3.9% growth of the median consumer staples company.

  Risks

  Slower real consumption growth in the second half, price pressure, and downward revisions to margin expectations.

• US Consumer Staples Sector

  A key sector for monitoring tariff rebates and cost pressures

  Strengths

  Median company sales still achieved 3.9% year-over-year growth.

  Weaknesses

  Industries receiving larger rebates also face stronger price pressures.

  Comparison

  Sales growth was lower than in consumer discretionary, but both reflect a relatively healthy consumer base in the second quarter.

  Risks

  Rebates are one-time benefits, while rising costs and forward-margin revisions may compress earnings.

• AI-Related Technology Assets

  Beneficiaries of AI adoption, services spending, and capital-expenditure themes

  Strengths

  Management discussions are shifting from generalized concepts toward more specific use cases, while recent AI services spending has accelerated materially.

  Weaknesses

  Only a small number of companies quantify AI's impact on applications or earnings, and current inference costs represent a low share of overall revenue.

  Comparison

  Sixty-five percent of management teams mentioned AI, but only 11% quantified specific application impacts and 2% quantified earnings impacts.

  Risks

  Accelerating spending may not translate simultaneously into verifiable earnings contributions, and large technology companies have a high concentration in market-wide metrics.

Key data

• S&P 500 Earnings Growth (Excluding Large-Tech Fair-Value Change Effects)31% year over yearThe report states that mark-to-market gains on private investments held by large technology companies contributed roughly an additional 20 percentage points.
• S&P 500 Real Revenue Growth (Excluding Energy)6.4% year over yearIn the second quarter of 2026, the fastest growth rate since 2021.
• Real Consumer Spending Forecast1% to 1.5% year over year in the second half of 2026Below market consensus, weighed down by fading tariff rebates, a low savings rate, weak real disposable income, and high oil prices.
• Tariff RebatesMore than $100 billionDistributed over the past three months; most companies characterize them as one-time benefits.
• Share of S&P 500 Management Teams Discussing AI65%Based on second-quarter earnings calls.
• Share of Management Teams Quantifying Specific AI Application or Earnings Impacts11% or 2%Only a small number of companies quantified the impact of specific AI applications or earnings effects.
• Share Discussing AI-Related Expenses7%In the second quarter of 2026, up from 2% a year earlier.
• AI Inference Costs as a Share of S&P 500 RevenueApproximately 0.1%The report cites Goldman Sachs portfolio strategists' estimate that aggregate current costs remain low.

Impact & implications

For the US equity market, strong second-quarter fundamentals support risk appetite, but earnings performance should not be simply extrapolated into the second half. Industries receiving larger tariff rebates, including consumer discretionary, consumer staples, and industrials, should be assessed for one-time gains, higher prices, and risks of downward forward-margin revisions. AI's directly quantifiable near-term contribution to overall corporate profits remains limited, but accelerating AI services spending and capital expenditures may continue to affect technology-related spending patterns.

Risks

• Fading tariff rebates may cause previously strong consumption data to weaken.
• High oil prices and related cost pressures may erode household real purchasing power and corporate margins.
• Although tariff rebates provide short-term cash-flow support, new tariffs have largely replaced repealed old tariffs, limiting their durability.
• Fair-value changes related to large technology companies may inflate overall earnings growth and obscure the pace of real growth across a broader set of companies.
• AI spending is accelerating, but its earnings benefits have not yet been broadly quantified, creating uncertainty around investment returns.

What to watch

• Whether July and subsequent retail-sales and alternative consumer-spending data continue to show a slowdown.
• The impact of real disposable income, the personal saving rate, and oil prices on consumer cash flow.
• Price announcements and forward-margin expectation revisions in consumer discretionary, consumer staples, and industrials.
• Subsequent uses of tariff rebates, price pass-through, and the impact of new tariffs on corporate costs.
• Whether companies increase quantitative disclosures on AI expenses, specific applications, and earnings contributions.