We’re proper within the coronary heart of earnings season with 42% of the S&P 500 reporting this week, together with a lot of the Mag7. The efficiency of the inventory market for the reason that begin of April has been astounding. This chart from JP Morgan highlights a giant motive why.
Annual S&P 500 EPS estimates virtually all the time drift decrease within the first months of the yr because the preliminary optimism of analysts meets the messier actuality of steerage, prices, and macro surprises. As JPMorgan put it, earnings revisions have damaged from a long-standing seasonal sample in 2026, with estimates rising relatively than falling within the first quarter. The financial institution’s framing captures the oddity neatly: “Over the previous 15 years, [analysts have] revised their EPS estimates down by a mean of two% between January and April… 2026 is a unique story.”
Three forces clarify the inversion. First — and largest — is the AI capex super-cycle lastly hitting revenue statements. Know-how sector estimates have been revised sharply increased since mid-February, with a lot of the transfer tied to Oracle and Micron, the latter benefiting immediately from reminiscence content material rising inside Nvidia’s chips. Hyperscaler capex is now monitoring towards roughly $775 billion for 2026, and that spending is displaying up as income and margin for the semiconductor and infrastructure names downstream. Tech revenue margins are operating close to document highs.
Second, the One Large Stunning Invoice Act, signed in July 2025, is doing actual work on backside traces. It restored 100% bonus depreciation retroactively to mid-January 2025 and reinstated speedy expensing of R&D — each large boosts to capital-intensive companies and the hyperscalers particularly. Morgan Stanley estimates the invoice’s speedy write-off provisions will elevate hyperscaler free money circulation by roughly $30 billion in 2026.
Third, breadth is enhancing. Q1 beats have been led by Industrials, Financials, and Supplies alongside Tech, suggesting the improve cycle is not purely a Magazine 7 story. JPMorgan now sees 2026 EPS of $330, up from $315.
