Earnings Wrap Up 2Q26 reporting season Focus shifts to cash flows from capex

EQUITY STRATEGY 03 August 2026

Equity Strategy Extract from a report

Earnings Wrap Up 2Q26 reporting season: Focus shifts to cash flows from capex

Asia Equity Strategist  Beats across developed markets with improving breadth. More than half of developed market Makhdoom Muteeb Raina companies have reported CQ2 2026 earnings, and the results have been strong. Year-on-year earnings growth has reached 57% in the US, 28% in Europe, and 58% in Japan. Earnings have also exceeded Head of Equity Strategy Charles de Boissezon consensus expectations by 31%, 3%, and 17%, respectively. The breadth of the earnings season has been equally robust, with 60% of companies reporting earnings above consensus estimates. Head of European Equity Strategy  Hyperscalers go through the cash flow test. Within US Big Tech, last week's results showed some Roland Kaloyan dispersion. Companies that exceeded market expectations saw their share prices move higher. For example, Microsoft and Amazon delivered robust cloud growth, demonstrating clear returns on their Manish Kabra AI investments. In contrast, companies that missed expectations and reported weaker free cash flow were penalized by the market, despite maintaining strong AI capex plans. In short, investors are no Equity Strategist (Europe) longer impressed by the scale of AI spending alone; they increasingly want evidence that these Kevin Redureau investments are translating into earnings growth.  US AI capex is driving growth elsewhere. Elevated AI spending is also supporting growth in Europe and Japan. Several market heavyweights have raised guidance on the back of AI-related demand. Advantest, for example, cited AI’s shift from training to inference as a driver of broader testing demand across ASICs, CPUs, and DRAM. Similarly, Hitachi and Schneider Electric raised guidance, benefiting from stronger demand in power grid and electrification businesses tied to the ongoing infrastructure buildout.

 Winners and losers from higher energy prices. Higher crude oil prices following the US-Iran conflict have benefited the energy sector, with earnings growing 120% year-on-year, exceeding consensus estimates by 5%. However, elevated oil prices have acted as a headwind for other sectors, including industrials, consumer, and healthcare, where higher fuel, logistics, and distribution costs have weighed on profitability.

Developed markets, EPS growth forecasts for 2026 29% S&P 500 STOXX 600 EuroSTOXX Topix FTSE 100

Earnings growth yoy. End of year 31/12/2026 except for Topix 31/03/2027. Source: IBES, DataStream, SG Cross Asset Research/Equity Strategy

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Above consensus Below consensus

In line = -3% to +3% versus Bloomberg consensus To be reported

STOXX 600 – EPS surprises (200/337 companies) * STOXX 600 – Sales surprises (274/437 companies) * 66 companies 15% 96 companies 29%

163 companies 137 companies 37% 41%

184 companies 42 companies 42% 62 companies 12% 24 companies 18% 6%

Based on Bloomberg adjusted earnings per share. In line = -3% to +3% vs Bloomberg consensus. *Companies that have reported out of total for which consensus estimates exist. Source: Bloomberg, SG Cross Asset Research/Equity Strategy

S&P 500 – EPS surprises (305/496 companies) * S&P 500 – Sales surprises (305/497 companies) * 93 companies, 19%

191 companies, 192 companies, 198 companies, 39% 38% 40%

91 companies, 197 companies, 16 companies, 15 companies, 18% 40% 3% 3% Based on Bloomberg adjusted earnings per share. In line = -3% to +3% vs Bloomberg consensus. * Companies that have reported out of total for which consensus estimates exist. Source: Bloomberg, SG Cross Asset Research/Equity Strategy

STOXX 200 Small – EPS surprises (49/85 companies) *…