US Weekly Kickstart Q2 2026 mid season earnings update

Portfolio Strategy Research 31 July 2026 | 4:47PM EDT

Q2 2026 mid-season earnings update

n AI stock volatility during the past week has continued to follow the typical Ben Snider | historical pattern following sharp Momentum rallies. The sharpest Goldman Sachs & Co. LLC

Momentum rallies in recent decades have usually been followed by periods of Ryan Hammond | consolidation similar to the recent drawdown. While earnings will determine the Goldman Sachs & Co. LLC eventual direction of the trade, both history and recent investor deleveraging Jenny Ma suggest an improved outlook going forward. | Goldman Sachs & Co. LLC

n The Q2 reporting season has indicated continued strength in the earnings Daniel Chavez | underlying the bull market. 61% of S&P 500 companies have reported Q2 Goldman Sachs & Co. LLC results. Of these, 64% have beaten consensus EPS forecasts by at least a Kartik Jayachandran standard deviation of estimates, one of the highest levels on record. While the | reaction to earnings beats has been lackluster for TMT stocks, the equal-weight Goldman Sachs & Co. LLC

S&P 500 has continued to climb alongside steady EPS growth. Christophe Sung | n S&P 500 earnings growth in Q2 is tracking above both consensus estimates Goldman Sachs & Co. LLC

and realized growth in Q1. S&P 500 EPS growth is tracking at 26% year/year excluding the “other income” from mega-cap tech’s appreciating equity investments. Including those gains, the headline growth rate is 45%. AI infrastructure stocks account for roughly a third of S&P 500 EPS growth in Q2. The median S&P 500 company is on pace to grow EPS by 12% in Q2, above the consensus estimate of 9% coming into the season. n Q2 results have also catalyzed broad-based upward revisions to 2027 earnings estimates. Since the start of the third quarter, the bottom-up consensus estimate for S&P 500 2027 EPS has been lifted by 1%, with positive revisions in most sectors and positive revision breadth across the S&P 500. The impact of rising input costs on margins remains a key risk. n Reports from the hyperscalers this quarter signaled rising capex spending and increasing need for external financing but also growing evidence of return on AI investments. The hyperscalers reported $182 billion of capex spending in Q2 alongside $5 billion of free cash flow and $101 billion of debt and equity issuance. Analyst estimates now point to over $1 trillion of capex in 2027, more than $100 billion above estimates heading into the quarter, and capex that will exceed cash flow from operations from 2026 through 2028. Estimates also show continued acceleration in hyperscaler revenue growth following above-consensus cloud growth of 48% this quarter.

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Goldman Sachs US Weekly Kickstart

The AI trade continues to follow the typical pattern of past Momentum factor rallies, albeit with exceptional volatility. Our long/short S&P 500 Momentum factor has recently registered its highest volatility in the last few decades outside of recession and continued to swing wildly this week. However, both the historical pattern and the sharp deleveraging that has recently taken place among hedge funds and ETF investors suggest rotational volatility should diminish in coming weeks.

Exhibit 1: Historical path of Momentum following sharp Exhibit 2: Momentum factor volatility is extremely rallies elevated

25 % 80 % Long/short Momentum factor returns 20 % around 3-month rallies of 20%+ Momentum factor 70 % 11 episodes since 1980 3-month realized 80th 15 % volatility percentile 60 % 10 % Current 50 % 5% episode 40 % 0% Average 30 % (5)% episode

(10)% 20 % 20th percentile (15)% 10 %

(20)% 0% ( Months around Momentum rally

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

While investors debate the long-term earnings implications of the AI boom, the Q2 earnings season so far has signaled continued strength in near-term fundamentals. Among the largest AI infrastructure stocks, while recent estimate upgrades have not been…