S&P 500 Earnings Momentum Broadens, but AI and Mega-Caps Still Drive the Cycle

November 10, 2025

The S&P 500 has spent the beginning of September pulling back from all-time highs.  The selling comes against the backdrop of strong operating results from S&P 500 constituents in the most recent quarter.  We’ve distilled takeaways from FactSet’s earnings insights to give you a snapshot of sector level earnings trends underpinning the market.

Corporate America delivered another strong quarter of earnings growth, underscoring the durability of the profit cycle even as macro and policy uncertainty linger. With 91% of S&P 500 constituents having reported, Q3 2025 blended EPS growth stands at 13.1% year-over-year, marking the fourth consecutive quarter of double-digit gains. Roughly 82% of companies beat earnings estimates and 77% topped revenue forecasts, both above their five- and ten-year averages. Revenue growth accelerated to 8.3%, the strongest pace since 2022, while the blended net profit margin improved to 13.1%—up from 12.5% a year ago.

Sector Earnings Landscape

Earnings breadth improved meaningfully in Q3, with eight of eleven GICS sectors posting year-over-year gains. The Information Technology sector once again led performance, delivering 27.1% EPS growth and 15.4% revenue growth on the back of semiconductor (+49%) and software (+23%) strength. Microsoft, Apple, Intel, Palantir, and Datadog all posted double-digit surprises.

The Financials sector ranked second with 23.7% EPS growth, as insurance, capital markets, and consumer finance firms all posted double-digit results. Notable contributors included JPMorgan, Allstate, and Morgan Stanley. Utilities (+23.2%) and Materials (+20.2%) followed, powered by independent power producers, renewable electricity firms, and the metals & mining complex.

By contrast, Communication Services was the only major drag, posting a -7.1% EPS contraction—entirely due to Meta’s $15.9 billion one-time tax charge. Excluding Meta, the sector would have delivered +12.8% growth. Industrials, Health Care, and Consumer Discretionary all posted modest but positive growth, rounding out a solid quarter for corporate profitability.

AI-Themed Growth: Structural Tailwind and Earnings Catalyst

AI continues to serve as the defining structural growth engine across sectors. FactSet data show that Information Technology contributed nearly one-third of total S&P 500 earnings growth in Q3, led by the Semiconductors & Semiconductor Equipment industry (+49%). Nvidia, AMD, Broadcom, and semiconductor capital-equipment suppliers saw exceptional operating leverage as AI infrastructure investment surged.

AI’s impact extends beyond technology. Financials cited automation and predictive analytics as cost-efficiency drivers, while industrials leveraged AI-powered logistics and maintenance systems to preserve margins. Even Health Care and Utilities are deploying AI in clinical data and grid optimization. The diffusion of these productivity gains has quietly lifted the S&P 500’s aggregate margins despite higher capex intensity.

Mag 7: Slower, but Still the Growth Core

The so-called “Magnificent 7” — Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia — remain the profit anchor of the index. Collectively, they delivered an estimated 28% year-over-year EPS increase, compared with roughly 10% for the rest of the index. Nvidia, Microsoft, and Amazon drove the majority of index-level earnings expansion, offsetting Meta’s tax-related decline and Tesla’s narrower margins.

While breadth improved in Financials and Industrials, these seven firms still account for nearly 30% of total S&P 500 earnings and an even larger share of market capitalization. Their continued strength underscores the dominance of asset-light, AI-enabled business models in an otherwise mature cycle.

Forward Sector Expectations

FactSet’s bottom-up forecasts suggest earnings growth will moderate but remain positive over the next year. Analysts project +7.5% EPS growth in Q4 2025, +11.6% for CY 2025, and +13.7% for CY 2026, with leadership shifting toward cyclical and interest-sensitive groups.

Source: FactSet Earnings Insight, Nov 7 2025; Myrtle Tree Investment Research synthesis.

Conclusion

The strongest forward earnings expectations reside in Information Technology, Financials, and Consumer Discretionary, reflecting continued AI leverage, margin recovery, and a more stable rate backdrop. The weakest growth outlooks are in Energy, Utilities, and Real Estate, where earnings are projected to expand only in the low-single digits.  At ETFsector.com, we think the pivot will be determined by the level of interest rates, consumer sentiment and resolution of global trade and government funding issues.  At present, the economy remains near full employment with interest rates generally moving lower and inflation moderating.  If investors get a near-term positive on shutdown resolution, we could see risk appetite firm and a new round of accumulation in upside exposures.  We are skeptical of AI weakness on fears of a “Bubble”.  One thing we know about investment bubbles is the real ones annihilate the skeptics on their way to becoming real bubbles.

Source: FactSet Earnings Insight – November 7, 2025 (John Butters, VP & Senior Earnings Analyst, FactSet Research Systems Inc.)

Additional charts and data sourced from FactSet Research Systems inc.