Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
- Total Q1 earnings for the 392 S&P 500 companies that have already reported results are up +21.7% from the same period last year on +10.5% higher revenues, with 80.1% beating EPS estimates and 77.8% beating revenue estimates. This is a better showing from these companies relative to other recent periods.
- The Tech sector has been a critical growth pillar since 2023 Q3 and is expected to play that role in 2026 Q1 as well, with expected earnings growth of +50.1%. Excluding the Tech sector’s substantial contribution, Q1 earnings growth for the rest of the S&P 500 index would be +11.1% (vs. +24.2% otherwise).
- Q1 earnings for the ‘Magnificent 7’ group of companies are expected to be up +45.7% from the same period last year on +24.6% higher revenues. Excluding the ‘Mag 7’ contribution, Q4 earnings for the rest of the index would be up only +17.1% (vs. +24.2%).
- The aggregate earnings total for Q1 is on track to be a new all-time quarterly record at $690.4 billion, surpassing the record set in the preceding quarter at $655.5 billion.
The Mag 7 Group’s Earnings Power
The four Mag 7 hyperscalers that reported Q1 results in recent days – Alphabet GOOGL, Amazon AMZN, Microsoft MSFT, and Meta META – have dominated headlines for the enormous sums they are spending on datacenters and other elements of AI infrastructure.
The group spent a collective total of $125 billion in 2026 Q1, with the currently announced capex budgets totaling $725 billion in 2026, up +77% from last year’s total and accounting for more than 2% of U.S. GDP.
The market appears to have found its peace with the ever-rising capital outlays, as the monetization question has been satisfactorily answered, particularly by Alphabet and Amazon. Alphabet is literally firing on all cylinders, but the Google parent’s cloud revenue growth was in a league of its own, up +63%, which follows growth rates of +48% in 2025 Q4 and an estimated +35% to +40% in 2025 Q3.
Amazon’s 2026 Q1 cloud revenue growth of +28% follows growth rates of +24% and +20% in 2025 Q4 and Q3, respectively. Unlike Alphabet and Amazon, Microsoft disappointed once again, reflecting the third quarter in a row of coming up short in its results and commentary.
Microsoft shares have been true laggards among these four hyperscalers, as the year-to-date performance chart below shows.
Image Source: Zacks Investment Research
Microsoft shares have been swept up in the ongoing software turmoil, so the issue isn’t solely the company’s stalled cloud unit. Microsoft had also banked heavily on OpenAI for its LLM, and that relationship hasn’t aged well. It is reasonable to expect that they will eventually get there, because after all, they have the resources and people. But it will likely take them a while.
At this stage in the Q1 reporting cycle, Nvidia NVDA is the only Mag 7 member that has yet to report March-quarter results. Nvidia is scheduled to report Q1 results on May 20th, with EPS and revenues for the period expected to be up +118.5% and +78.7% from the same period last year, respectively.
Combining the actual results for the 6 Magnificent 7 members that have reported already with estimates for Nvidia, total Q1 earnings for the group are expected to be up +45.7% from the same period last year on +24.6% higher revenues, which would follow the group’s +26.1% earnings growth on +19.4% revenue growth in 2025 Q4.
The chart below shows the group’s blended Q1 earnings and revenue growth relative to what was achieved in the preceding period and what is expected in the coming three periods.
Image Source: Zacks Investment Research
We discuss the Mag 7 group’s enormous earnings power in the body of the report, but it is useful to show here how the group’s earnings outlook is steadily improving, as the chart below shows.
Image Source: Zacks Investment Research
The Mag 7 group is a big deal, as these seven mega-cap companies alone are on track to account for 27% of all S&P 500 earnings power this year. These stocks currently account for 34.3% of the index’s total market capitalization.
The Earnings Big Picture
The overall earnings picture continues to be of all-around strength and a steadily improving outlook. This favorable earnings backdrop is showing up in the revisions trend, which can be seen in how expectations for 2026 Q2 have evolved in recent weeks.
Image Source: Zacks Investment Research
The sectors enjoying positive estimate revisions since the start of April include Energy, Tech, Basic Materials, Utilities, and Business Services. But Q2 estimates in the aggregate would be modestly down since the start of the period, had it not been for the increase in Energy and Tech sector estimates.
The chart below shows S&P 500 expectations for 2026 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the following three quarters.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
An interesting development on the revisions front has been the evolution of full-year 2026 estimates since the start of the Iran war. No surprises in the trend reversal in Energy sector estimates since the start of March, but estimates for 8 other sectors have also moved higher in that time period. The Tech sector’s positive revisions trend has continued in this period, while the revisions trends for the Basic Materials and Consumer Staples sectors shifted from negative to positive since the start of March.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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