S&P 500 EPS Outlook Beyond the 2026 boom momentum persists, pace moderates

S&P 500 EPS Outlook Beyond the 2026 boom: momentum persists, pace moderates

Raising 2026E to $365 (+33%) after another beat & raise 14 September 2026

Corporate America delivered another outsized beat in 2Q, with S&P 500 EPS growing Equity and Quant Strategy +50% YoY including GOOGL and AMZN’s one-time investment mark-ups and 32% United States excluding those gains, blowing past consensus of 22%. Guidance was also stronger than Savita Subramanian usual, particularly in Tech and Industrials. Following 2Q results, we raise our 2026 EPS Equity & Quant Strategist BofAS forecast by 6% from $345 to $365 (+33% YoY) vs. $362 bottom-up consensus. Slightly over half of the increase reflects one-time gains at GOOGL/AMZN, with the remainder driven by stronger underlying growth in 2Q and robust guidance. Victoria Roloff Equity & Quant Strategist Launching 2027E at $410 (+12%): good but less great BofAS We expect S&P 500 EPS growth to decelerate but remain above trend in 2027. Our See Team Page for List of Analysts forecast of $410 (+12% YoY) is slightly below bottom-up estimates and above top-down (Exhibit 1). Although our economists' 2.2% real GDP growth forecast (see Global Economic Viewpoint report) would historically imply high-single-digit EPS growth, we believe the AI investment cycle, manufacturing strength, and productivity gains should Exhibit 1: We forecast S&P 500 EPS of keep growth elevated next year. $410 in 2027, slightly below bottom-up consensus Risks: More earnings eggs in one AI basket… Actual & consensus S&P 500 EPS Five stocks (NVDA, GOOGL, MU, MSFT, AAPL) now account for a record 27% of NTM S&P 500 earnings, while Tech and the Mag 7 represent 50%. Semis alone are expected YoY EPS growth to contribute over 60% of the total consensus EPS growth in 2027 (Exhibit 13). We Actual believe the capex cycle has more room to run (see report: High Yield & Loan Strategy: 2025 $275 13% Funding the Future #2, 16 July 2026), but the growing dependence on a highly BofA Strategy interconnected AI complex amplifies two-sided risks. Case in point: 2026 consensus 2026 $365 33% Semis EPS growth has been revised up by 70ppt over the past year from ~30% to 2027 $410 12% Bottom-up consensus ~100%, adding 6ppt to S&P 500 EPS growth. 2026 $362 32% … plus: margin pressures, earnings quality 2027 Top-down consensus $417 15%

Some of the S&P 500's recent net margin expansion reflects factors unlikely to persist, 2026 $345 26% including one-time investment gains and a timing asymmetry in the AI buildout, where 2027 $392 14% capex beneficiaries recognize revenue before spenders recognize the full cost through Source: FactSet, Bloomberg depreciation, leading to lower FCF relative to net income (Exhibit 48). Strong but slowing BofA GLOBAL RESEARCH

sales growth should support further margin expansion from here, but rising hyperscaler D&A (12% of sales in 2027 vs. 10% in 2026) raises the bar for AI monetization, while Acronyms: memory, tariff and commodity costs remain swing factors. We forecast that the S&P FCF: Free Cash Flow 500’s net margin (ex. Financials) reaches 16.3% in 2027 (vs. 16.6% consensus). D&A: Depreciation & Amortization Strong earnings may not be enough for strong returns Although we are encouraged by the fundamental backdrop, worsening liquidity, geopolitical tensions, sticky inflation and unfavorable seasonal trends keep us cautious on equities in the near term, particularly given that the S&P 500 has gone nearly six months without a 5%+ pullback. Moreover, history suggests returns tend to slow when EPS growth remains above trend but decelerates, as we expect in 2027. Our year-end S&P 500 target (report) implies 3% downside, while our NTM target implies 2% upside.

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