According to the latest statistics compiled by LSEG I/B/E/S, Wall Street analysts have significantly raised their full-year 2025 earnings growth expectations for the benchmark S&P 500 index from +20.9% year-over-year on October 17 to a new projection of +25.4% as of January 16, 2026. Based on consensus estimates from Wall Street analysts, the broad technology sector within the S&P 500 is anticipated to demonstrate a more robust growth trajectory than the index's overall earnings in 2026. As of last weekend, the latest consensus projects the broad technology sector's 2025 full-year earnings growth rate at +25.4%, with an astonishing acceleration to +31.1% expected for 2026, significantly surpassing the 2025 pace and far exceeding the historical average earnings level of the U.S. stock market. Within this broad tech sector, the "Mag 7"—the seven tech giants holding substantial weight in both the S&P 500 and the Nasdaq 100—exert the most considerable influence on the sector's profits. Analyst consensus estimates compiled by institutions indicate the "Magnificent Seven" (Mag 7) are projected to achieve aggregate earnings growth of approximately 24% in 2026. In contrast, the remaining 493 companies in the S&P 500 are expected to grow earnings by about 12.5%. This means the profit growth rate of the "Magnificent Seven" is nearly double that of the rest of the market's large-cap companies. Therefore, from the perspectives of earnings expectations and market weight structure, the technology sector—especially the seven leading giants—remains the "core force" for earnings growth and bull market performance in the 2026 U.S. stock market, with expectations far exceeding those of the other 493 index components and intensifying their influence on the index's direction. Despite increasingly evident market rotation, from an earnings outlook standpoint, this rotation may be short-lived. The unprecedented AI computing infrastructure build-out and the AI investment theme centered on the Mag 7 are poised to be the stock market's most powerful narrative throughout 2026, just as in 2024 and 2025.
The so-called "Magnificent Seven" (Mag 7), which command a high weighting (approximately 35%) in the S&P 500 and Nasdaq 100, include: Apple, Microsoft, Alphabet (Google), Tesla, NVIDIA, Amazon, and Meta Platforms (Facebook's parent company). They are the core drivers behind the S&P 500 repeatedly hitting new highs and are viewed by top Wall Street investment firms as the portfolio most capable of delivering substantial returns to investors amid the largest technological transformation since the internet era. The continuation of the U.S. bull market hinges critically on the financial reports and future earnings guidance of the "Magnificent Seven." The start of 2026 has been favorable for the U.S. stock market, with investors broadly expecting the bull market that began in 2023 to persist. However, a significant bull market breakthrough for the tech sector and large-cap growth stocks may remain elusive until the market receives the Q4 2025 earnings reports and, crucially, the Q1 2026 and full-year 2026 guidance ranges from the Mag 7 and other AI computing infrastructure leaders like Broadcom, AMD, and Oracle. With U.S. markets closed on Monday, January 19th, the aggregation of market earnings expectations might stall this week. Previously, over the past four weeks, S&P 500 earnings reports were not updated promptly due to a data issue with LSEG I/B/E/S that began in mid-December. LSEG I/B/E/S recently acknowledged this problem and provided updates and corrections.
The following summarizes the progression of full-year earnings expectations for the overall S&P 500 index and the technology sector for 2025, 2026, and 2027 since late September 2025. From December 5th to December 12th, 2025, earnings expectations showed a significant upward trend, which then moderated in the week following December 19th. The table clearly shows that the S&P 500's overall earnings growth expectation for 2025 has risen from +20.9% on October 17th to +25.4% as of January 16th, 2026. This represents a notable increase over a single quarter, a trend strongly supported by the exceptionally robust Q4 2025 results and future outlook from TSMC, often called the "king of chip foundries." It is worth noting that analysts' upward revisions to the 2026 tech sector earnings growth expectation have been relatively moderate, which is normal given the powerful base effect from 2025's strong profits, yet the 2026 projection still exceeds the generally expected year-over-year growth rate for 2025. Analysts broadly anticipate that the technology sector's earnings growth will be faster in 2026 than in 2025. As of last weekend (ending last Friday), Wall Street analysts' consensus expects the broad technology sector's full-year 2025 earnings growth rate to be +25.4% (this statistical period, including some fiscal year-ends, will conclude around mid-February 2026), while they project the sector's 2026 growth rate to reach +31.1%.
Although the COVID-19 period severely distorted growth rates for the technology sector—the strongest earnings growth industry of this decade (2020-2030)—the growth momentum closely tied to Artificial Intelligence has undeniably become the core driver of S&P 500 tech sector earnings since 2023. The following data, compiled by institutions, shows the average growth rate of Earnings Per Share (EPS) for the broad S&P 500 technology sector over more than a decade, highlighting the sector's unparalleled driving force behind the S&P 500 bull market and its strongest support—earnings growth—since 2020: From Q1 2023 to Q3 2025: +18%; From Q4 2022 to Q1 2020: +19%; From Q4 2019 to Q4 2011: +10%. It is evident that as AI technology permeates tech sub-sectors at an accelerating pace, the sector's growth rate and the resulting S&P 500 earnings have significantly surpassed historical averages. The S&P 500's cumulative gain of approximately $30 trillion over the past three years—a "super bull run"—has been largely driven by the world's largest tech giants (the U.S. Mag 7) and, to a great extent, powerfully propelled by chip companies (like Micron, TSMC, and Broadcom) and power system suppliers (like Constellation Energy) that have greatly benefited from the massive global investment in AI computing infrastructure. Multiple top analysts and institutions share the view that the immense scale of AI infrastructure investment, AI-driven overall capital expenditure, and expectations for revolutionary AI commercialization led by ChatGPT are the primary drivers of the S&P 500's overall earnings growth in the coming years.
Particularly within the broader technology sphere, AI investment plays a key role in boosting demand for high-performance server clusters, AI data center construction, cloud computing services, and fueling a new wave of growth in the SaaS software domain, thereby enhancing the profitability of tech companies, especially the large-cap giants. Consequently, the technology sector continues to hold a central position in driving S&P 500 earnings growth for 2026, with expectations far outstripping those of other industry sectors. AI serves as the fundamental force propelling tech earnings and overall market bullish sentiment, extending its core role in dominating the U.S. bull market since 2023. This clearly indicates that tech stocks remain the decisive factor in whether the bull market that began in 2023 can continue into 2026, with their exceptionally strong earnings growth expectations providing crucial underlying support for the bull market logic. Even as other sectors accelerate their expansion, the technology sector's earnings growth speed, valuation weight, and capital expenditure influence still position it as the force most likely to lead the market higher in 2026. Within this sector, the earnings growth contribution and impact of high-weighting giants like NVIDIA, Alphabet, and Microsoft are the most potent. In 2026, the Mag 7 may continue to exemplify the "myth of market leadership." The "Magnificent Seven" of the U.S. stock market—Apple, Microsoft, NVIDIA, Alphabet (Google's parent), Amazon, Meta Platforms (Facebook's parent), and Tesla.
Looking across the entire U.S. market, these seven tech giants, with their heavy weighting in the S&P 500 and Nasdaq 100, have been the core force leading and driving the long-term bull market since 2023. Their exceptionally strong revenue from AI deployments, rock-solid fundamentals, consistently robust free cash flow reserves over many years, and expanding stock buyback programs have attracted a flood of global capital. The new U.S. earnings season has begun, and undoubtedly, the "Magnificent Seven" along with the three AI computing infrastructure leaders—Broadcom, AMD, and Oracle—are critically important for the overall profit trend of U.S. stocks and the sustainability of the bull market. Among the top three companies by market cap in the S&P 500, two—Apple (AAPL.US) and Microsoft (MSFT.US)—are scheduled to report earnings in the last week of January 2026. Microsoft plans to report on January 28th (Eastern Time), and Apple will report on January 29th (Eastern Time), meaning the market must wait a few more weeks for the latest results from these two Mag 7 constituents. Alphabet (GOOGL.US), the U.S. tech giant recently surpassing Apple in market cap to become second only to NVIDIA, will report in early February. Two other crucial chip giants, NVIDIA (NVDA.US)—one of the seven—and Broadcom (AVGO.US), a key contributor to the recent bull market as an AI computing infrastructure leader, are set to report in the final week of February 2026.
It is noteworthy that the S&P 500's reclassification several years ago moved companies many investors consider "tech stocks," such as Amazon (AMZN.US) and Tesla (TSLA.US), to the Consumer Discretionary sector, while giants like Alphabet (GOOGL.US) and Meta (META.US) were categorized under Communication Services. This explains why the earnings growth trends of the Consumer Discretionary and Communication Services sectors have frequently ranked just behind the Technology sector in recent years, primarily due to the significant contributions of these high-weighting tech giants. Oakmark, the prominent value investment firm from Chicago, managed by value investing expert Bill Nygren, mentioned in an earnings call several months ago that if the S&P 500 had not reclassified companies like Amazon, Alphabet, and Tesla into other sectors, the market cap weighting of the broader technology sector within the index might be closer to 55% today, rather than the current approximately 35%. As of the U.S. market close on January 16, 2026, the combined market capitalization of the top three companies in the S&P 500—NVIDIA, Alphabet, and Apple—approached roughly 20% of the index's total market cap. The 2026 U.S. market has started on a positive note, but a genuine bull market breakthrough remains pending until core tech companies and large-cap growth stocks (primarily the large-cap Mag 7 companies) release their earnings reports and guidance. Recent signs indicate that, pending the official release of the Mag 7's results and outlook, market flows have begun shifting towards international and emerging markets, as well as U.S. small-cap ETFs like the Russell 2000 ETF.
Despite increasingly obvious market rotation, in the view of institutional investor JR Research, who successfully predicted in late 2022 that NVIDIA's market cap would surpass Apple's, this rotation is unlikely to last long. "The theme surrounding AI computing infrastructure build-out and the AI investments of the Mag 7 will remain the strongest narrative for the global stock market throughout 2026, just as in 2024 and 2025," the investor stated in a report. JR Research, along with Brian Gilmartin, founder of Trinity Asset Management, recently published research asserting that the AI infrastructure and Mag 7 theme remain central, with the "picks and shovels" companies in tech and the mega-cap tech giants still driving the market's long-term value expansion. As shown, the lion's share of actual value flows to large tech companies involved in executing AI data center development and deployment, such as NVIDIA, Broadcom, Alphabet, AMD, and Micron. Therefore, JR Research stated, "I find it difficult to envision a new leader emerging in this value capture—we are still in the early stages of a multi-trillion dollar AI investment race," meaning the market is still pricing in who truly holds the AI crown. Tony DeSpirito, BlackRock's Global Chief Investment Officer for Fundamental Equities, believes current valuations do not represent an "internet bubble-like multiple." However, this seasoned asset manager noted this doesn't mean there are no pockets of speculation or irrational exuberance, but he does not believe such euphoria is concentrated in AI-related "Magnificent Seven" stocks. J.P. Morgan stated in its annual outlook that the 2026 market trading landscape will not differ significantly from 2025, with market-leading stocks exhibiting extreme crowding and record concentration in AI giants (i.e., the U.S. Mag 7 continuing to hold high weights). J.P. Morgan views the current AI-driven super investment cycle as central to its optimistic outlook. This cycle has already driven record capital expenditure, rapid earnings expansion, and created an "unprecedented" market concentration in AI beneficiaries and high-quality growth companies. The report defines these quality companies as those with strong profit margins, solid cash flow growth, disciplined capital return, and low credit risk, emphasizing that this technology-driven structural shift is reshaping the market landscape.
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