Bret Kenwell, US Investment and Options Analyst at eToro, has provided insights on the latest US earnings season, underscoring strong big tech performance, sector-specific trends, and ongoing AI investments.
Key Earnings Highlights
Last week marked a significant week of earnings, with over 40% of the S&P 500 market capitalization reporting — including five of the Magnificent 7 holdings. So far, more than 80% of S&P 500 firms have beaten analysts’ earnings expectations, delivering 13% year-over-year growth — nearly double initial consensus estimates.
Sector Performance
- •Leading sectors : Consumer staples, energy, and healthcare, with over 90% of companies surpassing earnings estimates.
- •Lagging sectors : Consumer discretionary, communications, and materials, which recorded the lowest earnings beat rates this season.
Amazon’s Strong Rally
Amazon has emerged as a standout, rallying approximately 10% to reach record highs following stronger-than-expected earnings and revenue. Investors responded positively to solid guidance and a strong performance from Amazon Web Services (AWS). This follows Amazon’s position as the weakest-performing Magnificent 7 stock in 2025 until Friday’s rally.
AI Investment Momentum
AI-related spending remains a key growth driver:
- •Alphabet and Meta raised their full-year capital expenditure outlooks, with Meta projecting a notable increase in 2026 compared with 2025.
- •Microsoft reported nearly $35 billion in quarterly capex, surpassing Wall Street forecasts, with CFO Amy Hood projecting capex growth to outpace 2025 in fiscal 2026.
Investments in AI infrastructure are alive and well. Recent deals and partnerships highlight the ongoing importance of AI, now reinforced by tangible investment numbers.
Investor Considerations
While tech stocks have outperformed this year — up more than 30% versus the S&P 500’s 16.5% gain — earnings reactions among the Magnificent 7 have been mixed. Investors should monitor companies such as Palantir, Advanced Micro Devices, and Uber, whose earnings may influence short-term market sentiment. With the Federal Reserve adjusting expectations around a potential December rate cut, any notable shift in sentiment could lead to market fluctuations.
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