64% of the company's profits have exploded, but the market remains indifferent! Goldman Sachs: Investors turning to AI and macro uncertainty.

In a report released by Goldman Sachs Group, Inc. strategist David Kostin on October 31st, it was pointed out that despite the strongest positive performance in recent years during the third quarter earnings season, investors reacted indifferently to it. As of now, about two-thirds of the S&P 500 index component companies have reported their performance, with 64% of companies exceeding market expectations by at least one standard deviation. Kostin noted that this proportion "is unprecedented outside the COVID-19 restart period." These better-than-expected performances are mainly due to revenue growth and stable profit margins: total sales increased by 6% year-on-year, with profit margins remaining around 11.8%. However, the market's response to the positive news has been noticeably lacking companies that exceeded expectations in earnings saw a median excess return of only 0.3 percentage points relative to the index on the day after the earnings release, well below historical averages. The report analysis stated that investors generally believe that the earnings for this quarter have low predictive power for future earnings prospects, and cited uncertainty in trade policy fluctuations, bank loan conditions, and other macro factors as the main influencing reasons. While earnings growth is slowing down, performance guidance remains optimistic Despite strong overall performance, earnings growth momentum has slowed somewhat. Earnings per share for S&P 500 index component companies are expected to grow by 8% year-on-year, lower than the 11% in the second quarter. However, companies are still maintaining optimistic performance guidance. Among companies forecasting fourth-quarter earnings, nearly half expect profits to exceed analyst expectations; Wall Street has raised the consensus expectation for the overall earnings per share of the S&P 500 index in 2026 by 2%, to $308. Artificial intelligence investments and labor efficiency come into focus Tech giants continue to drive capital spending in the field of artificial intelligence. The "hyperscale" companies led by Amazon.com, Inc., Alphabet Inc. Class C, Meta, Microsoft Corporation, and Oracle Corporation are expected to see a 65% increase in capital expenditures to $518 billion by 2026. Goldman Sachs Group, Inc. points out that investors will only give positive feedback when AI investment is matched with strong earnings performance. At the same time, companies are also tightening labor costs. Since September 2025, 17 S&P 500 companies have announced layoffs totaling approximately 82,000 people, a very small number of which are directly related to artificial intelligence. In earnings calls this quarter, nearly half of the companies mentioned the productivity gains brought about by AI. Credit conditions and market outlook Additionally, loan losses at some regional banks have raised concerns about non-bank Financial Institutions, Inc.'s loan business. Analysts at Goldman Sachs Group, Inc. believe these issues are "isolated incidents" and not systemic risks. These loans account for 13% of total commercial bank loans in the U.S., with nearly half of them not yet drawn down. Goldman Sachs Group, Inc. maintains its previous forecasts: earnings per share for the S&P 500 index will be $262 in 2025 and $280 in 2026; it is expected that the index will approach 6800 points by the end of 2026 and rise to 7200 points in the next 12 months. Kostin concluded that the third-quarter earnings season showed strong fundamentals, but investor enthusiasm is limited, indicating that the current market favors predictability over unexpected positives, and also reflects a cautious attitude towards macroeconomic uncertainty.