Goldman previews the S&P 500 Q2 earnings season: earnings remain strong, with AI infrastructure contributing the most

Overview

This is a Goldman Sachs U.S. equity strategy weekly report focused on a preview of the S&P 500 Q2 2026 earnings season. The report argues that the past year's rise in U.S. equities was driven mainly by earnings rather than valuation expansion, so the upcoming earnings season will determine whether the market rally can continue. The financial sector will kick off earnings season during the week of July 13, around 75% of S&P 500 market cap companies will have reported by the first week of August, and NVIDIA (NVDA) will report on August 26.

Core views

The core view is that Q2 earnings still have strong support, but the market hurdle has clearly risen. Solid nominal GDP growth, positive earnings revisions, and the AI investment cycle support overall earnings; at the same time, consensus already requires S&P 500 Q2 EPS growth of 22% year over year, so the upside surprise may be smaller than in Q1. The report especially emphasizes four main themes: AI infrastructure, energy prices, margin pressure, and the return on hyperscaler cloud capex.

Analysis framework

The report combines bottom-up analyst consensus, sector and stock-level earnings contribution breakdowns, earnings revision breadth, macro growth tracking, investor positioning sentiment indicators, options-implied earnings-day volatility, and Goldman's top-down S&P 500 forecast to assess the potential impact of the Q2 earnings season on the market and sectors.

Methodology notes

• Earnings forecastBottom-up consensus

  Uses analyst forecasts for index, sector, and stock sales, margins, and EPS to measure the hurdle for earnings season.

  The report uses metrics such as 22% year-over-year growth in S&P 500 Q2 EPS and 9% EPS growth for the median stock to judge whether market expectations are too high, and further compares differences in earnings contributions across sectors and stocks.

• Earnings momentumEarnings revision breadth

  The number of companies with upward earnings revisions minus the number with downward revisions, divided by the total number of companies with revisions.

  The report notes that over the past month, every sector except consumer staples has seen more upward than downward earnings revisions, indicating that earnings momentum remains fairly solid.

• Market sentimentGoldman Sachs U.S. equity sentiment indicator

  Combines nine positioning indicators across institutional, retail, and overseas investors to measure investor positioning.

  The indicator rose to 2.0, the highest since December 2024, suggesting that market sentiment and positioning have become relatively hot and that short-term returns have less room for error.

• Valuation methodsImplied equity risk premium from a multi-stage dividend discount model

  Calculates the discount rate by setting the fair value from a multi-stage dividend discount model equal to the current market price, then subtracts the 10-year U.S. Treasury yield.

  The report uses this framework to compare the relative relationship between S&P 500 valuations and U.S. Treasury yields to help assess valuation pressure.

Asset mapping & comparison

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

• S&P 500 Index

  The report's core research target and benchmark for judging the earnings season.

  Strengths

  Earnings remain the main driver of index gains, nominal GDP growth is about 7%, earnings revision breadth is positive across most sectors, and Goldman sets targets of 8000 by year-end 2026 and 8300 over 12 months.

  Weaknesses

  The Q2 consensus hurdle is high, the forward P/E is about 20x, and the investor sentiment indicator has risen to elevated levels.

  Comparison

  Compared with Q1, Q2 still has a strong earnings foundation, but the upside surprise may be smaller than in Q1.

  Risks

  If earnings fall short of the expected 22% index growth rate, margins are hit by cost shocks, or evidence of AI returns is insufficient, index upside may be limited.

• NVIDIA CORP (NVDA)

  An important contributor to S&P 500 earnings growth and a key company within the AI infrastructure theme.

  Strengths

  Together with Micron (MU), it contributes more than 40% of S&P 500 EPS growth this quarter, supported by demand for AI infrastructure.

  Weaknesses

  The market is demanding more evidence on returns from AI capex and the realization of related revenue.

  Comparison

  Among the top ten earnings-contributing stocks, NVIDIA (NVDA) and Micron (MU) stand out the most.

  Risks

  If its August 26 results and management commentary fail to prove AI demand and investment returns, volatility in the stock and the AI chain could increase.

• Micron Technology, Inc. (MU)

  Together with NVIDIA (NVDA), forms the core of this quarter's AI infrastructure earnings contribution.

  Strengths

  The report notes that Micron's results this week reminded the market that earnings in the AI infrastructure segment remain strong.

  Weaknesses

  Semiconductor earnings contributions are highly concentrated, and the market has high demands for sustainability.

  Comparison

  Ranks near the top in the table of contributions to S&P 500 Q2 earnings growth.

  Risks

  If the pace of memory and AI infrastructure demand slows, expected earnings contribution could weaken.

• AI infrastructure stocks

  The largest thematic source of S&P 500 earnings growth contribution this quarter.

  Strengths

  Expected to contribute nearly 60% of S&P 500 EPS growth, reflecting that the AI investment cycle remains strong.

  Weaknesses

  Contribution is highly concentrated, which can amplify the index's dependence on the earnings of a small number of stocks.

  Comparison

  The top ten contributing stocks are expected to account for nearly 75% of S&P 500 Q2 earnings growth, with concentration significantly higher than in typical sectors.

  Risks

  If returns on AI spending, the source of corporate AI budgets, and the economics of token consumption remain unclear, valuation and expectation revisions may follow.

• Energy sector

  The main beneficiary sector from rising energy prices.

  Strengths

  Consensus shows the energy sector's Q2 EPS will grow 110% year over year, with positive margin change.

  Weaknesses

  Energy prices have been volatile recently, and earnings are sensitive to oil prices and refining conditions.

  Comparison

  Compared with the consumer sector, rising energy prices are an earnings tailwind for energy but a cost and demand headwind for consumer.

  Risks

  A decline in oil prices or a slowdown in demand could weaken the momentum of upward earnings revisions.

• Consumer sector

  A pressured sector under rising energy prices and expectations of slower consumption.

  Strengths

  Recent consumer spending data remain strong, and lower oil prices plus a rebound in consumer confidence support near-term performance in discretionary consumption.

  Weaknesses

  Higher energy costs increase input pressure, and economists expect consumption to slow in the second half of 2026.

  Comparison

  Relative to energy and information technology, the consumer sector has weaker expected earnings growth in Q2.

  Risks

  If consumption slows or cost pressures cannot be passed through, margins and earnings may come under pressure.

• Hyperscaler cloud providers

  A key observation target for AI capex and the return on AI commercialization.

  Strengths

  Most 2026 capex budgets have already been set, and upward revenue revisions, backlog, and gross margin improvement after Q1 provide some evidence of commercialization.

  Weaknesses

  Weak free cash flow, increased equity and debt financing, and uncertainty over frontier model market share have weighed on recent share prices.

  Comparison

  The report expects less volatility in capex estimates this quarter than in Q1, but revisions to 2027 budgets may increase near year-end.

  Risks

  If management cannot explain how AI spending translates into revenue and profit, related stocks may continue to underperform.

Key data

• S&P 500 return over the past 12 months21%The report says this return was entirely driven by earnings, highlighting the importance of the Q2 earnings season.
• Consensus S&P 500 Q2 EPS estimate22% year-over-year growthThis is the highest expectation level before the start of an earnings season since 2021.
• Q2 EPS estimate for the median S&P 500 stock9% year-over-year growthLower than the 13% growth rate in Q1, but broadly in line with the median growth rate in 2024 to 2025.
• Goldman Sachs 2026 S&P 500 EPS forecastUSD 340, up 24% year over yearThe same as bottom-up analyst consensus and above the top-down strategist consensus of USD 330.
• Goldman Sachs 2027 S&P 500 EPS forecastUSD 385, up 13% year over yearBottom-up analyst consensus is USD 397, up 17% year over year.
• S&P 500 target level8000 by year-end 2026; 8300 over 12 monthsCorresponding target returns are 9% and 13%, respectively.
• Current forward P/E20xThe report points out that the index's rise over the past 12 months was not accompanied by an increase in the forward P/E.
• Q2 nominal GDP tracking growthAbout 7% year over yearAbove the roughly 6% pace in Q1 and above the consensus median stock sales growth estimate of 5%.
• Earnings contribution from AI infrastructure stocksNearly 60%Micron (MU) and NVIDIA (NVDA) together contribute more than 40% of S&P 500 Q2 EPS growth.
• Q2 sector earnings growth highlightsEnergy 110%, information technology 59%Consensus shows that energy and information technology are the main supports for overall earnings growth.
• Investor sentiment indicator2.0The highest reading since December 2024, indicating warming positioning sentiment.
• Earnings reporting scheduleAbout 75% of S&P 500 market cap companies will have reported by the first week of AugustThe financial sector starts during the week of July 13, and NVIDIA (NVDA) reports on August 26.

Impact & implications

In terms of investment implications, if corporate revenue and margins outperform conservative sales expectations, earnings may still support further upside in U.S. equities; however, because the expectation bar is high, positioning sentiment is hot, and stock volatility on earnings days may be above average, the market has low tolerance for misses or insufficient evidence of returns on AI spending. At the sector level, energy and information technology are relatively better positioned, while consumer and healthcare face greater earnings growth pressure.

Risks

• Consensus expectations for Q2 are already very high, and the hurdle of 22% year-over-year growth in S&P 500 EPS may limit the degree of upside surprise.
• Energy prices and supply-chain pressures are pushing up input costs, which may compress margins for most companies.
• The investor sentiment indicator has risen to its highest level since December 2024, and overheated positioning increases the risk of negative reactions to earnings.
• Options pricing suggests that stock volatility around earnings this quarter may be above the historical average.
• There is still uncertainty around returns on AI capex, the source of corporate AI budgets, and the economics of token consumption.
• Expectations for slower consumption in the second half of 2026 may weigh on earnings for consumer-related companies.
• Index earnings contributions are concentrated in a small number of AI infrastructure and large-cap stocks, and insufficient market breadth may amplify concentration risk.

What to watch

• The financial sector opening the earnings season during the week of July 13, and the reporting progress of about 75% of S&P 500 market cap companies by the first week of August.
• Whether actual S&P 500 Q2 EPS growth can exceed the 22% consensus expectation, and whether the median stock can exceed the 9% expectation.
• Whether revenue growth outperforms the conservative 5% sales expectation for the median stock, and whether it can match the roughly 7% nominal GDP growth rate.
• Margin commentary, especially whether pressure from energy, wages, supply chains, and input costs continues to worsen.
• What hyperscaler cloud providers say about 2026 and 2027 capex, AI revenue, backlog, gross margins, and free cash flow.
• NVIDIA (NVDA)'s August 26 results, as well as the earnings contribution of AI-chain companies such as Micron (MU), Broadcom (AVGO), and Microsoft (MSFT).
• Whether corporate AI spending mainly comes from new budgets, and whether AI inference costs, API tokens, and GPU cloud infrastructure spending are generating visible returns.
• Whether investor sentiment, fund flows, and earnings-day implied volatility continue to heat up.