Wall Street just got a lot more optimistic about corporate America’s bottom line. Full-year 2026 earnings growth projections for the S&P 500 have surged to 32%, up from 24% before second-quarter results started rolling in. The culprit, if you can call it that, is a tidal wave of AI-related spending that’s lifting profits across sectors most analysts didn’t even associate with artificial intelligence a year ago.
The revision, reported as of September 9, reflects a remarkable Q2 reporting season where 86% of S&P 500 companies beat analyst expectations. That’s the highest beat rate since 2021, when companies were clearing a pandemic-era bar that had been set deliberately low.
The AI spending engine keeps accelerating
The primary driver behind these rosy numbers is the hyperscaler capital expenditure boom. Amazon, Microsoft, and their mega-cap peers are pouring money into data centers and AI infrastructure at a pace that makes previous tech investment cycles look modest. Capital expenditure forecasts for 2026 among major hyperscalers are projected to exceed $754 billion, a figure that rivals the entire GDP of countries like the Netherlands.
The communication services sector has been revised up to a projected 51% earnings growth. Consumer discretionary is tracking at 32% growth, buoyed in part by Amazon’s dual role as both an AI infrastructure company and the world’s largest online retailer.
Quarterly profit expansions have consistently exceeded 20% this year. For context, average annual earnings growth for the S&P 500 over the past two decades has typically landed in the high single digits.
Banks are raising targets in lockstep
The earnings momentum has forced Wall Street’s biggest institutions to update their playbooks. Goldman Sachs has raised its S&P 500 price target to 8,000. HSBC went slightly further, setting its target at 8,100. JPMorgan also moved to 8,000, citing the strength of the earnings cycle as the primary justification.
What investors should actually watch
Valuations across the S&P 500 are historically elevated. When nearly every company is beating estimates by comfortable margins, those estimates get ratcheted higher, which means the bar for future beats rises too. The 86% beat rate is impressive, but maintaining it quarter after quarter requires companies to keep delivering results that outpace increasingly ambitious forecasts.
The AI capex cycle introduces its own set of risks. Hyperscalers are spending aggressively based on the assumption that AI workloads will generate returns sufficient to justify hundreds of billions in infrastructure investment. If monetization timelines stretch out, or if the return on invested capital disappoints, the spending could decelerate. That would ripple through the semiconductor, construction, and utilities sectors that have been riding the wave.
Investors focused on the semiconductor supply chain, data center REITs, and the hyperscalers themselves will want to pay close attention to Q3 capex guidance, which will serve as the next real test of whether the 32% growth trajectory holds or begins to moderate.