In markets, narratives can matter as much as hard data. Investors make decisions based on the stories they tell one another. Over the past seven weeks the tales being swapped have been of war in Iran, its effect on global energy markets and presidential social-media activity. The S&P 500, America’s benchmark index of stocks, has moved up and down with Donald Trump’s estimates of the odds of an end to the conflict. It surged to an all-time high on April 17th as America and Iran agreed to let traffic resume in the Strait of Hormuz. It dipped on April 20th after the deal collapsed.
And yet, beneath all of that noise, US corporate earnings in 2026 are doing something remarkable. They are growing — fast, broadly, and with a consistency that embarrasses the pessimists.
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The earnings picture heading into this season was already extraordinary before a single company reported. According to FactSet’s April 17 Earnings Insight, the consensus estimate for Q1 2026 S&P 500 earnings growth stood at 13.2% year-on-year at the start of the quarter — the highest entry-level estimate for any earnings season since Q2 2022. That is not a soft bar. That is a high-jump pole set at altitude.
What happened next was better still. With 10% of S&P 500 companies reporting actual results as of April 17th, 88% beat EPS estimates — well above the five-year average of 78% and the ten-year average of 76%. The magnitude of those beats was equally striking: companies are reporting earnings 10.8% above estimates, against a five-year average surprise rate of just 7.3%.
This is the sixth consecutive quarter of double-digit year-on-year earnings growth for the index. Six consecutive quarters. The S&P 500 hit a record intraday high of 7,126.06 on April 17th. That is not a coincidence.
The Strait of Hormuz has been effectively closed since early March, cutting off roughly 20% of global oil supply — what the International Energy Agency has called the largest energy supply disruption in the history of global markets. More than 500 million barrels of crude and condensate have been removed from the market, according to Kpler data. U.S. crude oil closed at $89.61 per barrel on April 20th after jumping 6.8% when the ceasefire unraveled. Brent settled at $95.48, up 5.6% on the day.
Iran declared the strait open on a Friday. Oil prices tumbled more than 10%. The S&P 500 surged. By the following Monday, Trump accused Iran of firing on a French ship, seized an Iranian vessel, and the deal was functionally dead. Stocks barely flinched, falling just 0.2%.
That asymmetric response is the most important data point of this earnings season — and nobody is talking about it enough. When peace breaks out, markets rally hard. When war resumes, markets shrug. That is not resilience born of confidence. It is resilience born of a very specific market bet: that American corporate profits have been insulated from the mayhem.
So far, that bet is paying off. But the reasons why demand closer inspection.
Goldman Sachs raised its year-end S&P 500 target to 7,600 in early April, citing 12% earnings growth and a broad recovery — but its own analysts immediately flagged a problem with that framing. As Goldman’s equity strategy team noted, consensus estimates for 2026 and 2027 are about 4% above January levels, but the improvement is not evenly distributed. Exxon Mobil and Micron Technology account for a disproportionate share of upward revisions, while the median S&P 500 company has seen little or no change to its 2026 earnings outlook.
This is a market that looks healthier at the index level than it does underneath. FactSet’s breakdown makes the concentration explicit: the Magnificent 7 are projected to deliver 22.8% earnings growth in Q1 2026. The remaining 493 companies are projected to deliver 10.1%. Strip out NVIDIA alone, and the Magnificent 7 growth rate collapses to 6.4% — lower than the broader market.
That is a meaningful distinction for any portfolio manager choosing between chasing the benchmark and staying selective. The headline number flatters the underlying reality.
The sector-level breakdown, per FactSet and IG’s Q1 earnings preview, tells a more nuanced story than the aggregate suggests.
| Sector | Q1 2026 Estimated YoY EPS Growth |
|---|---|
| Information Technology | +45.0% |
| Materials | +24.2% |
| Financials | +15.1% (blended: +19.7%) |
| Consumer Discretionary | ~+12.0% |
| Industrials | ~+10.0% |
| Communication Services | Flat to slight growth |
| Utilities | ~+5.0% |
| Real Estate | ~+3.0% |
| Consumer Staples | ~+2.0% |
| Energy | -0.1% (volatile) |
| Health Care | -9.8% (Merck charge; ex-Merck: +2.8%) |
The Financials sector has been the early season standout. JPMorgan Chase reported $5.94 EPS against a $5.47 estimate. Citigroup delivered $3.06 versus $2.65. Bank of America and Morgan Stanley both beat. The blended Financials growth rate jumped from 15.0% to 19.7% in a single week of reporting.
Energy, meanwhile, is the cautionary tale embedded in this table. The sector’s estimated earnings growth swung from +12.9% in early April to -0.1% by mid-month, driven almost entirely by downward revisions to ExxonMobil’s guidance. The average Q1 oil price of $72.67 per barrel was only 1.8% above Q1 2025’s $71.38 average — the Q1 price spike only materialized late in the quarter, too late to flow through to most upstream earnings.
Here is the uncomfortable truth that the bull narrative glosses over: US corporate profits are not resilient because American companies are exceptionally strong. They are resilient because they have exceptional pricing power — and because AI capital expenditure is creating an accounting illusion of demand.
Consider the mechanics. Technology companies are reporting earnings that are overwhelmingly driven by AI infrastructure spending. The firms writing the checks — hyperscalers, cloud providers, semiconductor companies — are booking revenues that appear as organic demand growth but are substantially circular: one tech giant’s AI capex becomes another’s top line. NVIDIA’s extraordinary contribution to S&P 500 growth (it is the single largest contributor for both Q1 2026 and full-year 2026 per FactSet) reflects an investment supercycle, not end-market demand expansion.
Meanwhile, the companies not in the AI supply chain — the median S&P 500 firm, the one Goldman says has seen no earnings revision — are passing higher energy and input costs onto consumers. That is pricing power. It is real. It has kept margins intact. But it is not growth in the classical sense. It is inflation in corporate clothing.
The IMF warned this week that global growth will take a hit even if the ceasefire holds, citing persistent energy disruption as a drag on output and a source of renewed inflation. “It’s clear we’re not going back to the Goldilocks scenario,” said Brian Arcese of Foord Asset Management. Investors who mistake pricing-power resilience for genuine economic strength will discover the difference when consumers, finally stretched too thin by elevated energy costs, stop absorbing the increases.
The real test of this earnings season is not Q1 — it is what companies say about Q2, Q3, and Q4. Most of Q1’s business activity predates the Hormuz closure, which only became a severe supply disruption in March. The damage in transportation costs, energy inputs, and supply-chain friction will show up in Q2 guidance calls, not Q1 actuals.
Analysts are currently forecasting earnings growth of 20.1%, 22.2%, and 19.9% for Q2 through Q4 2026 respectively. The full-year 2026 consensus sits at 18.0% growth. Those are staggering expectations for an economy operating under the largest energy supply disruption in modern history. A single round of conservative guidance from the major industrials — logistics companies, airlines, manufacturers — could puncture them quickly.
The market is already signaling some unease. According to FactSet’s April 17 update, companies reporting positive Q1 earnings surprises have actually seen an average price decrease of 0.2% in the two days following their reports. The market is saying: we already priced this in. Show us what comes next.
There is a concept worth naming here: the “narrative premium.” It is the excess valuation that accrues to markets when the dominant story — in this case, AI-driven earnings supercycle plus geopolitical resolution — outpaces the underlying data. The forward 12-month P/E ratio for the S&P 500 stands at 20.9, above both the five-year average of 19.9 and the ten-year average of 18.9. Since March 31st, the price of the index has risen 7.6% while forward EPS estimates have risen just 1.5%. That gap is narrative premium, not fundamental re-rating.
Narrative premiums can persist for a long time. They can also collapse with remarkable speed when a single data point — an unexpected miss on forward guidance, an oil price shock that does not reverse — forces a reassessment of the story.
The S&P 500 hit an all-time record on April 17th. American profits are, genuinely, impressive. The earnings season is, genuinely, strong. But investors who are treating current valuations as justified by fundamentals — rather than supported by narrative — are carrying a risk they may not have fully priced.
The Strait of Hormuz is still closed. Thirteen million barrels a day are still locked out of global markets. And Q2 guidance calls start this week.
Frequently Asked Questions
What is driving US corporate earnings growth in 2026?
US corporate earnings growth in 2026 is being driven primarily by the Information Technology sector, which is projected to report 45% year-on-year EPS growth in Q1, largely due to AI infrastructure investment and semiconductor demand led by NVIDIA. Financial sector earnings have also significantly outperformed, with major banks including JPMorgan Chase, Citigroup, and Bank of America all beating Q1 estimates. The broader S&P 500 is on track for its sixth consecutive quarter of double-digit earnings growth, with analysts forecasting 18% full-year 2026 growth according to FactSet data.
How has the Iran war and Strait of Hormuz closure affected S&P 500 stocks?
The S&P 500 has shown surprising resilience despite the Strait of Hormuz being effectively closed since early March 2026, representing the largest energy supply disruption in modern history per the IEA. The index hit a record intraday high of 7,126.06 on April 17th when a brief ceasefire opened the waterway, then fell only 0.2% on April 20th when the deal collapsed. Energy sector earnings have been volatile — projected growth swung from +12.9% to -0.1% in two weeks — but the tech and financials sectors have more than offset the disruption at the index level.
Are S&P 500 earnings expectations too high for 2026?
Analysts are currently forecasting 18% full-year earnings growth for the S&P 500 in 2026, with Q2 through Q4 estimates ranging from 20.1% to 22.2%. These figures are historically elevated and carry substantial downside risk from Q2 forward guidance, given that most Q1 business activity predated the Hormuz supply disruption. The forward P/E ratio of 20.9 — above both the five- and ten-year averages — reflects a significant narrative premium tied to AI investment and geopolitical resolution expectations. A single round of conservative guidance from industrial or energy companies could materially revise these expectations lower.
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