GS What Matters Today: Earnings Beat a High Bar but Were not Rewarded, Increasing our Conviction in Alphabet, MSCI Rebalance Implications 13Aug26

GS - What Matters Today: Earnings Beat a High Bar but Were not Rewarded, Increasing our Conviction in Alphabet, MSCI Rebalance Implications

1) Earnings Beat a High Bar but Were not Rewarded Many Beats but no Reward: beat rate remains one of the highest on record: 64% of companies are beating EPS by > 1 std of consensus estimates - well above the 49% avg. Market isn’t rewarding you in either direction. Median 1-day excess return vs. the S&P was +20bps for a beat (vs. +95bps historically) and - 118bps for a miss (vs -211bps historically).

Sector theme - beat & fade in TMT: TMT beats lagged the S&P by -192bp on T+0 versus +75bps outperformance for non-TMT beats. Crowding Reactions (desk views): We track T+0 performance for names flagged as crowded (longs 8+, shorts 3 or fewer). Across 204 names, the season-

to-date equal weighted L/S spread is −14bps at a 53% hit rate - crowded shorts outperformed crowded longs (+0.40% vs. +0.26%). On a weekly basis, the crowded L/S pair returned +3.80% cumulatively - but Week 1 alone contributed +5.46%. Excluding it, the cumulative flips to −1.66%. (TY Ryan Sharkey)

2) Increasing our Conviction in Alphabet On August 12th, Google hosted a keynote presentation to introduce its latest hardware devices and the next generation of the Gemini powered consumer-facing AI initiatives. While its hardware efforts remain small in scale relative to other operating segments of the broader Alphabet corporate structure, we see a few interesting narratives emerging from the event: 1) against the backdrop of an uncertain/volatile smartphone demand landscape, Google’s products have continued to take steady market share of hardware (smartphones & wearables), albeit off a low base; & 2) evolving AI features being directly integrated on-device (powered by custom silicon and multimodal generative models) are increasing