Earnings Scoreboard - AI: balancing hype vs execution

 

Renée Friedman, Global Head of Research

Horacio Coutino, Multi-asset Strategist

“In fact, I would say we will quickly lose even the social permission to actually take something like energy, which is a scarce resource, and use it to generate these tokens, if these tokens are not improving health outcomes, education outcomes, public sector efficiency, private sector competitiveness across all sectors, small and large.

— Satya Nadella, CEO of Microsoft, at the World Economic Forum Annual Meeting 2026, on 20th January, 2026.

Who’s scoring highest and why

During the week of 19th January, 32 S&P 500 companies (including 4 Dow Jones Industrial Average components, 3M, Johnson & Johnson, The Travelers Companies, and Procter & Gamble) reported earnings. Although most of these companies exceeded expectations, market momentum was nonetheless shaped by elevated risk premia stemming from geopolitical concerns. As a result the US dollar index declined 1.93% and gold continued towards the $5,000 per ounce mark.

As of 23rd January, 79.7% of the 65 S&P 500 companies that have reported beat earnings expectations, while 68.8% surpassed revenue forecasts, signifying a strong beginning to this earnings season. According to FactSet, the blended Q4 earnings growth rate stands at 8.2%, the same as last week’s 8.2% and higher than the 8.3% projected at the end of the quarter on 31st December. This earnings season is on track to mark the tenth consecutive quarter of positive earnings growth for the index. The S&P 500 last saw four straight quarters of double-digit earnings growth throughout 2021.

The S&P 500 surprise factor is currently at 5.3%. This is lower than the average of 7.4% seen over the past four quarters and below the five-year average of 7.7%. Within sectors, Materials leads with a 64.8% positive earnings surprise, while Health Care has beaten estimates by 1.0%. Since the end of Q4, Materials has experienced the most significant improvement in earnings growth among all 11 sectors, shifting from a projected increase of 8.8% as of 31st December, to 10.5% today.

At this early stage, the blended net profit margin for the S&P 500 is 12.8%, which is below the previous Q3’s net profit margin of 13.1%, but above the year-ago net profit margin of 12.7% and above the 5-year average of 12.1%.

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