10 Quarters of SPX Growth — But Mag 7 Still Carries the Load
As 2025 Q4 earnings season enters its most critical week in late January 2026, the US stock market stands at a crossroads of multiple narratives. This week, more than 100 S&P 500 components are scheduled to report their results.
I. S&P 500 Status Quo: 10 Consecutive Quarters of Growth and Valuation Challenges
According to the latest FactSet data, the performance of the S&P 500 for Q4 2025 is characterized by steady growth but a declining "surprise factor":
Earnings Performance: The blended earnings growth rate for the S&P 500 currently stands at 8.2%. If this holds, it will mark the 10th consecutive quarter of year-over-year earnings growth for the index.
Revenue Growth: The blended revenue growth rate is 7.8%, representing the second-highest growth rate for the index since Q3 2022 (11.0%).
Declining Surprises: Among companies that have reported, only 75% have exceeded EPS estimates, which is below the 5-year average of 78%. The aggregate earnings surprise magnitude is 5.3%, also trailing the 5-year average of 7.7%.
Valuation Levels: The forward 12-month P/E ratio for the S&P 500 is 22.1, significantly higher than the 5-year average (20.0) and the 10-year average (18.8).
II. Core Drivers: The "Dominant" Contribution of the Mag 7
Within the 8.2% growth of the S&P 500, contributions are highly concentrated among top-tier companies. The five largest contributors to year-over-year earnings growth for Q4 are: NVIDIA, Boeing, Alphabet, Micron Technology, and Microsoft.
The "Magnificent 7" as a group is expected to achieve a year-over-year earnings growth of 20.3%. If these seven companies are excluded, the remaining 493 companies in the S&P 500 would show an earnings growth rate of only 4.1% for the quarter.
Valuation Premium: The Mag 7 is currently trading at approximately 126% of the S&P 500's multiple (a 26% premium). While a premium exists, it remains within a historically reasonable range compared to the 5-year median premium of 43% and a peak of 71%.
III. This Week’s Focus: Four Giants Reporting Jan 28-29
The week features the most pivotal reports from the Magnificent 7:
Wednesday, Jan 28: $Microsoft(MSFT)$ , $Meta Platforms, Inc.(META)$ , and $Tesla Motors(TSLA)$ will report results after the market close.
Thursday, Jan 29: $Apple(AAPL)$ will conclude the week's major tech earnings after the market close.
Recently, the Mag 7's performance has lagged behind the broader market. Following a prolonged period of valuation expansion, the market now has a low tolerance for guidance misses, as these reports will directly test the actual impact of AI investment on bottom-line results.
IV. Outlook 2026: From Tech-Led to Broad-Based Growth
Analysts remain optimistic about the 2026 calendar year (CY 2026), suggesting that market breadth may improve over the coming year:
Broad Market: The S&P 500 is projected to achieve an overall earnings growth of 14.7% for 2026.
Mag 7: The group is expected to maintain its lead with an earnings growth rate of 22.8%.
S&P 493: The remaining 493 companies are projected to see earnings growth accelerate to 12.1%, a significant improvement over 2025.
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