Earnings Scoreboard - It’s all about affordability

We do continue to see the higher-income customers coming to Walmart. We're meeting more of them, they're buying more, they're coming more frequently

• John Furner, CEO of Walmart, remarks in Bentonville, Arkansas, 8 June 2026

Who’s scoring highest and why

From 11 August to 17 August, 12 S&P 500 companies, including 1 Dow Jones components (Cisco Systems) reported earnings. According to LSEG I/B/E/S data, the blended Q2 earnings growth rate for the S&P 500 now stands at 51.6% as of 14 August, up from 50.4% a week earlier and the 18.8% pace anticipated at quarter-end. 

Q2 earnings season remains extraordinary on a blended basis. The S&P 500's blended y/o/y earnings growth rate is at 51.6%, a rate that would mark the strongest since Q2 2021's 91.6%. Though the figure remains distorted by the same non-operating valuation metrics at Alphabet and Amazon that inflated the prior two weeks; excluding those two names, the blended growth stands at a still extraordinary 33.2%. This would still mark the second consecutive quarter above 25% and the seventh consecutive quarter of double-digit earnings growth for the index.

Blended revenue growth stands at 15.4%, the strongest since Q4 2021, with 76.0% of companies that have reported revenue coming in above estimates. At the sector level, Energy leads with revenue growth of 42.2%, followed by Information Technology at 35.6% and Communication Services at 12.8%. Health Care remains the only sector reporting a y/o/y earnings decline of 6.7%. Furthermore, as of 7 August, the S&P 500 Q2 blended net profit margin stands at 16.9%, the highest FactSet has recorded since it began tracking the measure in 2009, a picture of corporate profitability that has rarely looked better. 

However, the consumer beneath those profits looks more fragile. July retail sales fell 0.6% m/o/m, the first decline in nine months and the steepest since May 2025, against expectations of a modest gain.

After a fortnight dominated by the artificial-intelligence supply chain, the docket now turns to the part of the economy where the AI boom is felt least directly and the cost of living most acutely. AutoNation on Tuesday, Analog Devices and Target on Wednesday and Walmart and Deere on Thursday, will collectively describe the health of the American consumer and the depth of the industrial cycle.

This week’s themes: a consumer divided, an AI trade that demands perfection and an industrial cycle probing for a bottom 

The consumer-spending inflection is the most consequential dynamic overhanging this week's calendar. The July retail-sales report's 0.6% monthly decline, the steepest since May 2025, was also the first drop in nine months. The University of Michigan Consumer Sentiment index also fell to a preliminary reading of 51. These data points create a meaningful test for consumer demand. The key question is if this weakness reflected the fading spring tax refund tailwind and the calendar shift around Amazon Prime Day, or if it is a real sign of a deeper problem for household spending power. 

Target, Home Depot and Walmart collectively provide the most granular, high-frequency read available on this question. Each occupies a different position on the value-to-discretionary spectrum. Walmart is most exposed to value and grocery demand. Target is more exposed to discretionary categories and apparel. Home Depot is tied to big ticket home improvement spending, which remains sensitive to interest rates. Divergent results across the three would suggest the softening is concentrated in discretionary and rate-sensitive categories rather than broad-based. However, convergent weakness across all three would be a materially more concerning signal for the health of aggregate consumption heading into the holiday season. The retail sales report already points to this divide. Core categories excluding autos, gasoline and volatile e-commerce timing effects held up better than the headline figure implied. Apparel, health and personal care and building materials all posted gains despite the decline in the aggregate figure.

The industrial and capital-equipment layer, tested through Deere and reinforced by the prior week's Applied Materials beat, offers a complementary signal about the durability of the broader CapEx cycle beyond consumer-facing categories. Deere's Construction and Forestry strength is increasingly tied to data centre and infrastructure construction. It is less dependent on traditional commercial or residential building. If this strength continues, it would show that the economic footprint of the AI buildout is broader than the technology sector alone. At the same time, Deere's large agriculture segment remains weak. It is now in its second consecutive year of decline. This weakness illustrates that not every industrial end-market is participating in the current capital-spending upcycle. It also reinforces the theme where AI-adjacent and infrastructure-linked demand outpaces traditional cyclical categories exposed to commodity prices and farm income.

Analog Devices will complete the semiconductor recovery picture that Applied Materials, Lam Research and the broader capital-equipment complex have already validated from the equipment side. Because Analog Devices' revenue is a downstream signal of actual chip demand across industrial automation, automotive electronics and AI data centre power and connectivity, its results provide a critical cross-check on the capital-equipment order strength registered by Applied Materials last week. Is it being matched by genuine end-demand pull-through, or are equipment bookings running ahead of the actual chip consumption that would justify the capacity being built?

This week’s preview: it’s all about affordability

Major Earnings on the Docket

• Home Depot opens the week on Tuesday before the market opens at 6 am EDT, with the earnings call scheduled at 9 am EDT. The quarter under review captures the largest selling season of the retail year for a home-improvement retailer, as the spring and early-summer months are decisive for the full year. Consensus calls for EPS of $4.73, up 1.1% y/o/y on revenue of $47.252 billion, reflecting y/o/y growth of 4.4%. The print is, at its core, a read on the big-ticket, credit-financed consumer and on a housing market that a persistently high long bond continues to hold in check.

The central driver remains the integration of SRS Distribution, the professional-contractor-focussed distributor acquired in 2024. It has consistently contributed the majority of the company's incremental sales growth in recent quarters and has extended Home Depot's reach into the more resilient professional trade channel. This segment has been described by management as less sensitive to elevated interest rates than traditional do-it-yourself (DIY) consumer demand. 

Investors will focus on comparable-sales trends by month, given that Home Depot has previously disclosed sequential improvement within a quarter (moving from negative to positive territory as the season progressed) as well as continued share gains in Pro-oriented verticals such as roofing, pool and landscape supply following the SRS integration. July's building-materials retail-sales category rose in the broader Census data as overall retail sales declined. This offered an early, encouraging read for Home Depot's core category ahead of the print.

Home Depot's core challenge remains the deferral of large discretionary projects, kitchen renovations and deck builds. This is the debt-financed work that a five-plus-percent mortgage rate has pushed to the sidelines. The Street has pencilled in operating income for Q2 of $6.774 billion, reflecting an operating margin of 14.3%, a contraction of 45 bps y/o/y, but a sequential q/o/q expansion of 114 bps.

One additional development frames the print. The company disclosed on 12 August that Chair, President and CEO Edward Decker had taken a temporary medical leave of absence, with an expected return within a few months.

• Target reports Wednesday, before the market opens at 6:30 am EDT, with the earnings call scheduled at 8 am EDT. The Street has pencilled in EPS of $2.35, anticipating y/o/y growth of 14.5% on revenue of $26.152 billion, up 3.7% from the year-ago $25.211 billion. Same Store Sales (SSS) are anticipated to be 2.38% following Q1’s 5.60% and the year-ago decline of 1.90%. The company has guided full-year EPS in the range of $7.50 to $8.50.

Target's turnaround narrative has centred on a combination of traffic-driven comparable-sales growth, an expanded and relaunched loyalty program now exceeding 100 million members and continued investment in same-day fulfillment services such as Drive Up. Michael Fiddelke became CEO at the start of February and this is the first full earnings cycle in which the strategy carries his imprint. Investors will look for evidence that the improving trend recorded in Q1, with SSS growth accelerating alongside a two-percentage-point upward revision to full-year sales guidance, extended into Q2. 

Investors will scrutinise the composition of comparable sales, with particular attention to the balance between traffic and ticket. They will also look for the relative contribution of discretionary categories versus the essential categories that have helped sustain the business through the downturn.

Gross margin will also be a central point of focus. Target’s pivot toward higher-margin merchandise, tighter inventory discipline and improved shrink control should support profitability even in the context of modest top-line growth. For Q2, consensus expects gross income to increase 5.9% y/o/y to $7.742 billion, implying a 62 bps y/o/y margin expansion to 29.6%. Tariff exposure is likely to remain a relevant issue on the call, given that Target’s discretionary assortment is heavily weighted toward imported goods. Management’s commentary on pricing, sourcing and the ability to protect margins without undermining demand will be key.

• Analog Devices also reports Wednesday, before the market open at 7 am EDT, with a conference call at 10 am EDT. Management's own guidance calls for revenue of $3.9 billion, plus or minus $100 million, alongside EPS of $3.30, plus or minus $0.15. The Street is pencilling an EPS of $3.34 on revenue of $3.920 billion. This implies 36.1% y/o/y revenue growth against the $2.880 billion reported a year earlier. This would continue the accelerated trajectory seen since Q2 2025. FCF is anticipated to grow 40.6% y/o/y to $1.527 billion.

The segment composition is the central story. Industrial, ADI's largest end market at 49.7% of total revenue, grew 55.4% y/o/y in the prior quarter to $1.799 billion. It was powered by record bookings across automated test equipment and aerospace and defence, both areas management has described as being at or near record levels. For Q2, the Street anticipates y/o/y growth of 50.7% to $1.937 billion. 

Communications, now the fastest-growing segment at 76.1% y/o/y growth to $555 million in the prior quarter, is increasingly an AI data centre proxy. Management has disclosed that data centres now represent more than three-quarters of Communications revenue, split roughly equally between power-delivery and optical-interconnect content. This dual-vector data centre exposure provides the company with a more diversified growth engine that can advance with either compute density or interconnect scaling. For Q2, the Street has pencilled in y/o/y growth of 69.3% to $631 million. 

Automotive, by contrast, remains the drag. It grew just 2.6% y/o/y in the prior quarter and shrank from 32.2% in Q2 2025 to 24.1% of total revenue. This was due to EV-related inventory unwinds and competitive pressure from Chinese electric-vehicle makers. For Q2, Automotive is expected to grow 8.0% y/o/y to $919 million.

• Walmart reports Thursday, August 20, before the market open, with materials released at 7 am EDT and the conference call scheduled at 8 am EDT. Consensus estimates stand at $0.74 EPS matching the top of the company's own guidance of $0.72 to $0.74, against a year-ago base of $0.68. The Street has pencilled in $186.700 billion in revenue for Q2, reflecting growth of 5.2% y/o/y following Q1’s 7.3% growth and SSS of 3.79%. Walmart has guided Q2 to constant currency net-sales growth of 4-5% and constant-currency operating-income growth of 7-10%. Full-year guidance includes Operating Margin of $33.273 billion at midpoint, up 6.9% y/o/y, and an EPS range of $2.75 to $2.85.

As the most precise listed proxy of the broad US consumer, Walmart's report carries outsized significance this week given the softening July retail sales data released last week. 

Investors should focus on the composition of comparable sales growth, particularly the extent to which it reflects higher transaction volumes, signalling durable demand, rather than larger average ticket sizes driven by still-elevated prices. This distinction will be central to assessing if the softness evident in the July jobs report and the subsequent decline in retail sales represents a temporary setback linked to the fading tax-refund tailwind, or the early stage of a more persistent deceleration in consumer spending power. 

Given Walmart's scale and its increasing exposure to higher-income trade-down shoppers, any commentary on tariff-related pricing pass-through and grocery-versus-general-merchandise mix will also shape how the market interprets the read-through for the broader retail sector heading into the holiday season. For Q2, Gross margin is anticipated to be 24.7%, up 72 bps from a year ago and up 43 bps from the prior quarter.

Beneath the top line, the more consequential story is the transformation of Walmart's profit mix toward higher-margin income streams: Walmart Connect’s advertising business, membership income across the core banner and Sam's Club and e-commerce.

• Deere & Co. closes the week Thursday, with the earnings call at 10 am EDT. Consensus anticipates $10.815 billion in revenue, up 4.4% y/o/y, and EPS of $4.69, down 1.2% y/o/y. Full-year fiscal 2026 net income guidance stands at $4.5 to $5.0 billion, a range management held steady even after a 15.0% EPS beat in Q. This unusually conservative posture leaves open the question of whether a guidance raise materialises this quarter.

The segment divergence that defined the prior quarter remains the central driver to track. Construction and Forestry, supported by accelerating infrastructure and data centre construction demand, increased 28.6% year over year to $3.790 billion in Q1, prompting management to raise its full-year growth outlook for the segment from 15% to 20%. Small Agriculture and Turf also strengthened, rising 16.4% to $3.485 billion. By contrast, Production and Precision Agriculture declined 13.9% to $4.503 billion, extending the downturn in large-equipment demand. Depressed crop prices and weaker farm incomes have sharply reduced appetite for new machinery. Dealer lots remain burdened by elevated used inventory. Deere has responded with successive production cuts designed to keep output below retail demand and clear the channel.

For Q2, Construction and Forestry is expected to grow 15.0% to $3.518 billion, while Small Agriculture and Turf is projected to advance 10.8% to $3.352 billion. Production and Precision Agriculture, however, is expected to fall 8.9% y/o/y to $3.892 billion. The comparison will also be complicated by the nonrecurrence of the one-time $272 million tariff refund tied to the Supreme Court's invalidation of IEEPA tariffs, which lifted Q1 equipment-operations margins by roughly 2.5 percentage points. As a result, reported margins should normalise lower this quarter even if underlying demand trends remain stable. It is important for investors to separate the mechanical margin reset from any change in Deere's operating trajectory.

Deere's direct tariff exposure remains approximately $1.2 billion for the full year, representing a 3% margin headwind. As the clearest listed read on the agricultural capital-equipment cycle, Deere's guidance will be important in assessing if the sector is approaching a bottom or bracing for another leg lower.

Last week’s themes and the bigger picture

The AI supply chain beat across the board and the market's tolerance for anything less than perfection quietly disappeared

The AI supply chain across optical, server, networking and equipment alike, is delivering demand and profitability that exceed even elevated expectations. However, the market has fully discounted that excellence, and the reaction function has inverted. A beat-and-raise is the price of admission, not a catalyst, and the marginal buyer now demands acceleration, clean margins and immaculate guidance.

Lumentum opened the week on Tuesday and delivered the optical layer's affirmative verdict. Revenue reached $1.010 billion, at the high end of its guided range and up 109.3% y/o/y, alongside EPS of $3.23 against a consensus of $2.97. Gross margin reached 50.4%, up 250 bps sequentially and 1,260 bps y/o/y, driven by the capacity-constrained pricing dynamic the prior edition of our Earnings Scoreboard flagged as the central driver to watch. Operating margin expanded to 36.6%, up 21.6 percentage points y/o/y, as evidence that the shift toward higher-value datacom components is translating into operating leverage.

The segment detail underscored the AI concentration: Components revenue of $649 million rose 102.7% and Systems revenue of $357 million rose 122.6%. Both figures confirm that the ramp of 1.6-terabit transceivers alongside continued 800-gigabit demand, the central driver management had flagged heading into the quarter, materialised across the portfolio. 

The report's quarter-ahead framing identified capacity as Lumentum's primary constraint, and that issue has since developed into a defining industry theme. CEO Michael Hurlston has publicly cautioned that the indium phosphide supply-demand imbalance is now more severe than the memory-market shortage. This view was supported by LightCounting's April 2026 forecast, which estimated transceiver demand at roughly 30% above available supply.

Analysts were broadly constructive following the strong results and outlook, citing sharp margin expansion, resilient component pricing and the continued ramp of 1.6T transceivers and optical circuit switching (OCS) deployments. Several noted that the company's core growth drivers remain intact as externally modulated laser (EML) demand continues to exceed supply, while emerging near-packaged optics (NPO) and co-packaged optics (CPO) technologies point to substantial long-term addressable-market opportunities.

Although continuous-wave (CW) laser supply constraints and the Federal Communications Commission (FCC) ban on Chinese transceivers remain near-term headwinds, overall sentiment remains bullish. It is supported by strong execution, expanding margins and Lumentum's strong position within AI optical infrastructure.

That same evening, Super Micro reported Q2 sales of $11.120 billion, up 93.2% y/o/y and 8.6% sequentially, though this landed near the low end of the $11 to $12.5 billion guided range due to what management described as short-term customer delays tied to power, cooling and networking readiness. The more consequential surprise was margin: Gross margin reached 17.60%, dramatically above the 8.2% to 8.4% range management had guided in its preliminary July disclosure, and above Q1’s 10.10%. EPS of $1.70 exceeded the prior year's $0.41 and Q1’s $0.84.

This outcome directly addresses the credibility question raised in the prior edition of Earnings Scoreboard. That concern centred on Super Micro's history of accounting-related disclosure issues. Management identified customer-side infrastructure delays as the cause of the revenue shortfall, rather than internal execution failures. The market focussed on the order book, as the company received more than sixty billion dollars of new orders during the quarter, lifted backlog to record levels and issued a fiscal 2027 revenue outlook of $65 to $72 billion, above prevailing consensus. Together, these details provided an encouraging disclosure base that can help restore market confidence in the company's reporting quality.

Analyst commentary was somewhat mixed following the results. The overall tone remained reasonably constructive, supported by stronger earnings, better gross margin performance and a solid revenue guide. Some analysts, however, continued to point to variability across several operating factors as a source of caution. The revenue shortfall was largely attributed to short-term customer delays, while the stronger earnings and margin performance helped explain the positive share-price reaction after the print. Analysts also noted that the sequential improvement in gross margin may moderate in Q3 as one-time benefits fade.

ON Wednesday, Cisco delivered the standout print of the week. Q2 revenue reached $17.252 billion, up 17.6% y/o/y and above the high end of guidance of $16.9 billion, with EPS of $1.22 versus a $1.17 consensus. The figure the prior edition of our Earnings Scoreboard had flagged as the most consequential data point resolved in Cisco's favour: the gap between AI-infrastructure orders booked and AI revenue recognised.

Hyperscaler AI infrastructure orders reached $9.3 billion in the trailing four quarters, exceeding the $9 billion target management had set, with $4 billion of that total booked in Q2 alone, more than double the $1.9 billion taken in Q1. Product orders overall grew 35% from the year ago figure, with hyperscaler orders growing at a triple-digit rate and networking orders climbing 40% for an eighth consecutive quarter of double-digit growth.

Management guided fiscal 2027 AI infrastructure revenue to $7.5 billion, nearly double the roughly $3.8 billion to $4 billion recognised in fiscal 2026. This was alongside a fiscal 2027 total revenue guide of $72.2 billion to $73.4 billion, comfortably above the $68.69 billion consensus. CEO Chuck Robbins characterised the environment as the early stages of a multi-year ‘networking supercycle’. Despite the strong beat and raise, shares fell in premarket trading, reflecting investor focus on a 232 bps y/o/y contraction in Gross margin to 66.3% amid component-cost pressures. Did Cisco’s valuation run ahead of a beat-and-raise of this quality?

Analysts were broadly upbeat following Cisco's strong results and initial fiscal 2027 guidance, citing momentum from the AI networking supercycle, the early stages of a campus refresh cycle and signs of stabilisation in Security. Some viewed the guidance as conservative in light of the current demand backdrop. However, gross-margin compression, tougher year-over-year comparisons, concerns that growth may be nearing a peak and the stock's elevated multiple were all seen as factors that could keep shares range-bound in the near term.

Coherent's Q2 results, reported the evening after Lumentum's, provided the largely non-overlapping second read on the optical-networking layer that the prior Earnings Scoreboard anticipated. Revenue reached a record $2.046 billion, up 33.8% y/o/y, comfortably within the guided $1.910 to $2.050 billion range and above the $1.985 billion consensus. EPS of $1.74 beat both the top of Coherent's own guided range and the $1.62 consensus. Non-GAAP gross margin expanded to 40.2%, a y/o/y expansion of 214 bps. Management guided Q3 to $2.200 to $2.400 billion in revenue, indicated that co-packaged-optics (CPO) revenue would begin in that quarter and set a target of a first three-billion-dollar quarter by the end of 2027.

At the segment level, Datacentre and Communications revenue expanded from $1.020 billion in the year-ago quarter to $1.6215 billion, underscoring that AI-driven optical demand constitutes the dominant share of Coherent's growth. The shares nonetheless fell close to 6% the following day. 

Analyst commentary was generally positive, as Coherent's strong quarterly results coincided with the acceleration of its $3 billion revenue target into 2027. Most analysts argued that the earlier timing of this target reflected not only stronger demand visibility, but also improving supply availability. Several attributed the post-earnings selloff to negative read-throughs from Lumentum, disappointment around gross-margin expansion in the guidance and concerns related to transceiver mix. Others, however, expected the ramp of 1.6T products and six-inch indium phosphide (InP) capacity to help offset these pressures over time. Coherent's confirmation of its CPO timeline was also viewed as constructive, particularly after recent market speculation, and analysts noted that Lumentum had offered a similar confirmation.

Applied Materials closed the week with the most significant read on the broader semiconductor capital-equipment cycle ahead of Nvidia's own report. Q2 revenue reached a record $9.115 billion, up 24.8% y/o/y and comfortably above both the $8.950 billion guidance midpoint and the $8.995 billion consensus. EPS reached a record $3.50, up 41.1% y/o/y, versus a $3.36 guidance midpoint and $3.40 consensus. Gross margin reached 50.4%, up 165 bps y/o/y, while operating margin expanded to 34.0%, a 330 bps margin expansion.

The memory-cycle acceleration the prior Earnings Scoreboard flagged as the segment most likely to command investor attention did, in fact, drive the beat. Applied Materials' own Q3 midpoint guide of $10.250 billion, $785 million above consensus, signals management's confidence that DRAM, high-bandwidth memory and NAND capital spending are accelerating together. This follows the memory-cycle narrative validated by Sandisk's tripled NAND-market growth projection and Lam Research's disclosure of more-than-doubled sequential NAND-equipment revenue. FCF rebounded to $2.330 billion from just $210 million in the prior quarter. As revenue scaled, Applied Materials’ execution was able to ease the capital-intensity concerns raised in earlier quarters. The company returned $860 million to shareholders through buybacks and dividends during the quarter. And, in keeping with the week's theme, the shares fell several percent after the print.

Analyst commentary was generally constructive, as Applied Materials' strong results and guidance were accompanied by improved visibility into forward demand. Several analysts attributed the post-earnings selloff to the absence of explicit Systems segment guidance, noting that q/o/q commentary implied growth of more than 40%, even as some investors appeared to have expected a clearer or more ambitious outlook. Others pointed to muted gross-margin expansion relative to peers, citing the impact of a lower-margin display mix and ongoing growth investments, while still expecting margin improvement over time as higher volumes and pricing leverage take effect. 

Analysts also viewed the company's plan to double Systems capacity by fiscal 2028 as a positive signal, supported by strong visibility across the next eight quarters and customer discussions extending into 2030. Overall, the selloff was largely interpreted as a function of elevated expectations and incomplete long-term guidance, with some analysts looking to the upcoming SEMICON West Breakfast on 13 October for additional long-term colour.