U.S. First-Quarter Corporate Earnings Remain Robust, But Consumer Outlook Is Concerning

Overview

This report analyzes corporate earnings and management commentary from the U.S. first quarter, finding that despite pressures from the Iran war and rising oil prices, most companies maintained strong revenue growth. However, the outlook for consumer spending is concerning, with a significant slowdown expected in the second half. The report also examines the impact of AI on the labor market and capital expenditure plans of large technology firms.

Core views

The report shows that S&P 500 companies achieved a 6.3% year-over-year revenue growth in the first quarter, the fastest pace since 2021 excluding the volatile energy sector. Nevertheless, consumer spending growth has shown signs of slowing, particularly as lower-income households are disproportionately affected by rising oil prices. The report notes that AI's direct impact on the overall labor market remains limited, but layoffs have become more frequent in specific segments such as tech firms and startups. Additionally, capital expenditure plans by large tech companies have far exceeded expectations, with projected growth of 83% in 2026, indicating accelerating investment in AI-related areas. Demand side: Consumer confidence has declined, especially among lower-income households, where rising gasoline prices have pressured spending capacity. Supply side: Rising input costs, particularly for raw materials and transportation, have pressured corporate margins. On AI, while the overall employment impact remains modest, layoffs have increased in specific sectors such as operations, data labeling, and software development.

Analysis framework

The report employs micro-level corporate earnings and management commentary to derive macroeconomic conclusions. First, it analyzes the financial performance of S&P 500 companies to gauge overall economic activity. Second, it uses sentiment analysis tools to quantify management discussions about consumers, assessing shifts in consumer confidence. Finally, it tracks company pricing announcements and AI-related commentary to evaluate trends in input costs and labor market dynamics. This methodology enables the report to extract macroeconomic signals from specific corporate performance data.

Methodology notes

• Industry/sector analysis frameworkVolume-price decomposition

  The report analyzes changes in consumer demand by comparing sales growth across different income groups.

  Volume-price decomposition is used to analyze consumption behavior differences among income groups, helping to understand the impact of inflation and income changes on spending.

• Industry/sector analysis frameworkSupply-demand framework

  The report analyzes the impact of rising input costs on the supply side and forecasts their pressure on profit margins.

  The supply-demand framework is used to assess how changes in factor prices transmit to corporate profits, helping investors understand the impact of cost pressures on profitability.

• Industry/sector analysis frameworkSubstitution Effect Analysis

  The report explores the substitution effect of AI in the labor market and its impact on specific job categories.

  Substitution effect analysis is used to evaluate how new technologies such as AI alter labor demand, helping to understand the impact of technological progress on employment structure.

Key data

• S&P 500 Company First-Quarter Revenue Growth (YoY)6.3%Actual growth rate excluding the energy sector
• Projected Real Consumer Spending Growth (Second Half 2026)1.3%Below consensus expectations
• Frequency of AI-Related LayoffsSignificantly IncreasedEspecially among tech firms and startups
• Large Tech Companies' 2026 Capital Expenditure Plan Growth83%Compared to 2025

Impact & implications

The report concludes that although first-quarter corporate earnings were strong, the consumer spending outlook remains bleak, particularly for lower-income households. The impact of AI on the labor market remains confined to specific sectors for now but may expand over time. Large tech companies' capital expenditure plans indicate that AI-related investment will continue to be a key driver of economic growth.

Risks

• Slowing consumer spending growth could drag down overall economic growth.
• Rising input costs will compress corporate profit margins.
• The long-term impact of AI on the labor market remains uncertain.

What to watch

• Changes in consumer confidence indices
• Further impact of AI on the labor market
• Execution of large tech companies' capital expenditure plans