INSIGHTS

On June 22, 2026

AAM Viewpoints — Take a Bow, S&P 500

Take a bow, S&P 500 — this earnings season was a wonderful performance.

Let’s recap what happened:

• The S&P 500’s Q1 earnings season ended with a strong 28% year-over-year growth rate, 3.5 times the long-term average earnings growth rate of 8%.
• Full-year 2026 earnings are now expected to grow more than 24% over last year, up from an estimated 15% growth rate at the beginning of the year.
• 2027 earnings expectations have held up and are still projected to grow another 16% on top of the much higher 2026 earnings base.
• Based on current expectations through the end of next year, we could see 11 straight quarters of double-digit earnings growth.

Let’s put this in perspective.

Source: FactSet as of 6/12/26 | Past performance is not indicative of future results | EPS = earning per share

As the chart shows, this quarter’s growth — the light blue bar — was substantially higher than any quarter over the past three years. Looking ahead, the green bars suggest strong growth has the potential to continue through the rest of this year and next year.

Think about that. It is remarkable that forecasted 2027 earnings growth has held up, even with the higher 2026 earnings now becoming the base for calculating 2027 growth. Said another way, even with expected 2026 earnings growth expanding from 15% to 28% since the beginning of the year, the 2027 estimate absorbed that increase and is still expected to grow another 16% on top of the higher 2026 figure.

What is driving this earnings picture?

GDP is expanding

Nominal GDP is expanding, and corporate earnings tend to be more closely tied to nominal GDP than real GDP. While real GDP has remained in the 2.0– 2.5% range from the beginning of 2025, nominal GDP has risen from 4.6% to almost 6.0%. Higher nominal GDP translates into greater corporate revenue, which supports stronger earnings power across the corporate sector.

Capital expenditure (CAPX) is expanding

Unprecedented levels of CAPX are flowing into the artificial intelligence (AI) buildout. Current estimates suggest AI hyperscalers could spend $850 billion on CAPX this year, more than $1 trillion next year, and potentially $1.2 trillion in 2028. This alone is roughly 1–3% of U.S. GDP. As this CAPX spending flows through the economy, it should provide a tailwind to earnings across many sectors.

What could interrupt this earnings picture?

The AI CAPX cycle slows

As stated earlier, CAPX could be supporting future earnings growth, already almost 1–3% of GDP, plus potential multiplier effects across many sectors. If this slows, expected earnings growth could also slow. However, expected CAPX is only increasing — since the beginning of the year, CAPX estimates for 2026 have already risen 35%. If this trend changes, earnings could have a headwind.

Other income effects could lower earnings quality further.

Two AI hyperscalers posted very strong earnings this quarter, helped by their investment write-ups. These write-ups flow through other income and are estimated to have contributed roughly 6–8% of the S&P 500’s earnings growth for the quarter. Even using the high-end estimate of 8%, this quarter’s earnings still grew by over 20%.

What does this mean?

While there are risks to the earnings picture, the current trend appears to be robust earnings over the next two years. With this backdrop, strategies focused on dividends and dividend growth look promising, in our view, and strong earnings have the potential to help companies maintain and grow their dividend payout over the next few years.

CRN: 2026-0604-13518 R