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Economic Trends · Sep 29th, 2026
What this video’s about
In this episode of The Market Share, Erik Clapsaddle, CFA, CFP®, Vice President and Senior Fixed Income Portfolio Manager, is joined by Matthew Lowe, CFP®, Portfolio Manager, to review second-quarter corporate earnings and look ahead to expectations for the third quarter.
Second-quarter earnings were strong, with earnings growth above 25% for the second consecutive quarter. But the number is only part of the story. Matt explains how artificial intelligence is becoming a broader corporate investment theme, which sectors contributed most to earnings growth, and why increasingly high expectations will put greater attention on both third-quarter results and companies’ forward guidance.
AI is moving beyond the technology sector
The conversation surrounding artificial intelligence is changing.
FactSet reviewed 493 S&P 500 earnings calls held between June 15 and September 14. AI was discussed in 331 of them, well above the five-year average of 178 calls. It was also the third consecutive quarter in which AI appeared in more than 65% of the calls reviewed.
More importantly, those conversations were not limited to technology companies. AI was mentioned during earnings calls by 91% of financial services companies, 90% of communication services companies, and 71% of energy companies.
Matt explains why that broader participation matters:
“We’ve moved from having conversations about software and semiconductors to actually moving into the broader economy and how it affects it.”
Erik agrees, noting that “artificial intelligence and its buildout have now affected every corner of the stock market.”
That shift gives investors another way to evaluate the development of the AI investment cycle. The focus is increasingly on how companies across different industries are investing in and using the technology.
Strong earnings came from several areas of the market
Energy, information technology, and materials stood out during the second quarter.
Energy reported earnings growth above 150%, while information technology exceeded 50% and materials surpassed 35%. Those figures contributed to another quarter of strong overall earnings growth.
The reasons behind those results differ by sector.
Matt notes that energy is highly cyclical because of its relationship with oil and gas prices. Current geopolitical conflict has affected commodity prices, while comparisons with weaker earnings from the prior year have also contributed to the sector’s unusually high growth rate.
Information technology tells a different story. As the largest sector in the S&P 500, its performance carries significant weight in the index.
As Matt puts it, “When you have earnings that are that strong, it really pulls the aggregate up and showcases the power of the S&P 500.”
Erik also points to the importance of breadth, saying that “broader contributions to strong earnings growth are a great thing for a diverse, stable equity market.”
When earnings strength extends across multiple sectors, the market is less dependent on a narrow group of companies to produce overall growth.
Expectations are rising for the third quarter
The earnings outlook remains strong as attention turns to the third quarter.
According to the FactSet figures Matt discusses, aggregate earnings growth is expected to reach approximately 28% to 29%. Energy is expected to grow by more than 100%, information technology by more than 60%, with materials also expected to remain strong.
If those expectations are met, it would represent three consecutive quarters of earnings growth above 25%. It would also extend a longer stretch of earnings growth, with eight consecutive quarters in the mid-teens or better.
The breadth of those expectations stands out as well. All sectors are expected to report positive earnings growth, with five projected to reach double digits.
Strong expectations raise the bar
A strong outlook is encouraging, but it also creates a higher standard for companies to meet.
Matt explains that with expectations already elevated, strong reported earnings alone may not be enough.
“We’ll need great earnings. But not just the earnings. Forward guidance is going to have to come in line as well.”
That distinction matters after several quarters of strong growth. Investors will be looking not only at what companies earned, but also at what management teams say about future demand, investment, and business conditions.
As expectations rise, the question shifts from whether earnings are improving to whether companies can continue delivering results that support those expectations.
Erik brings the discussion back to the underlying reason earnings matter so much to investors: “Plain and simple, we need private enterprise to sustainably grow and thrive.”
Conclusion
Corporate earnings remain one of the fundamental drivers of long-term stock market performance. The second quarter delivered another period of strong growth, with meaningful contributions from energy, information technology, and materials.
At the same time, AI continues to expand beyond the technology sector and into conversations throughout the broader economy. That gives investors more information about how businesses are approaching the technology and where investment is taking place.
With third-quarter expectations already high, the next earnings season will provide another important test. Reported results will matter, but so will what companies tell investors about the road ahead.
Stay informed with The Market Share for thoughtful insights into the earnings, economic trends, and market developments shaping the investment landscape.
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