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FollowingWall Street prepares for earnings season: AI and technology giants dominate earnings growth, while traditional sectors are under pressure
Wall Street is gearing up for a new round of earnings season. In the third quarter of 2026, overall profits of companies in the S & P 500 are expected to jump significantly by approximately 31%. However, this growth is not evenly distributed among major U.S. companies, but is highly concentrated in artificial intelligence (AI) and technology.
The technology industry is forecast to contribute about two-thirds of the index's earnings growth. This concentration trend raises a key question: How strong are the fundamentals of the broader corporate sector in the United States when a few leading companies capture most of the profit growth?
AI stocks drive S & P 500 earnings boom
Companies such as Nvidia, Microsoft, Alphabet, Amazon and Meta remain at the core of the AI investment cycle, either providing infrastructure support or investing billions of dollars in technology research and development. Although the high interest rate environment poses challenges to other areas, strong demand for AI chips, cloud computing and data centers still supports the profitable performance of the technology industry.
This divergence is increasingly evident in the concentration of the S & P 500 index, with large technology companies already dominating the weight of the index. According to FactSet's earnings forward-looking data, as of October 2, analysts expect the S & P 500 index earnings growth to be 29.5% in the third quarter, with the technology sector leading the way. Interestingly, during the third quarter, analysts instead raised their quarterly earnings forecasts, an increase of 1.4%. Normally, earnings expectations tend to be lowered as the earnings season approaches.
Higher oil prices boosted energy industry profits by 115%
Technology is not the only industry benefiting from a special economic environment. Energy companies are expected to see year-on-year earnings growth of a staggering 115%, driven by a roughly 30% rise in oil prices.
High crude oil prices have increased the profitability of oil producers, but they have also increased operating costs for airlines, manufacturers and other companies. At the same time, consumer goods and real estate companies are facing a more stringent environment, with high borrowing costs limiting their pricing flexibility. This division among industries also explains why the Nasdaq index has been able to outperform even as most sectors of the stock market are struggling.
Can AI profits continue to support Wall Street?
Although U.S. bond yields climbed above 5%, the S & P 500 index has recently hit a record high, reflecting investors 'confidence in corporate profitability. However, higher yields mean a lower present value of future earnings under today's valuation system, which is particularly detrimental to companies with high valuations.
This tension forms the core issue of the current stock market outlook.
