Bank of America drastically raised its earnings forecast for the S&P 500 in 2026: After the explosive first quarter earnings reports, the earnings cycle is still expanding.

Bank of America's global research department released a heavy research report on Monday, significantly raising its full-year earnings per share (EPS) forecast for the S&P 500 index in 2026 from $310 to $335, corresponding to a year-on-year growth rate of up to 22%. The background of this adjustment is an "exceeding expectations" first-quarter financial report and the resilience of corporate prospects far exceeding market expectations. Bank of America's latest forecast model assumes that excluding the financial sector, S&P 500 revenue will achieve an 11% growth in 2026, with a net profit margin rising to 14.5%, 1.5 percentage points higher than the previous year. In addition, Bank of America expects a 8% increase in dividends in 2026, but the support of stock buybacks for EPS is set to be lower than during the era of zero interest rates. Against the backdrop of overall positive earnings in the U.S. stock market, Bank of America's judgment is not unique. As of May 8, 83.2% of S&P 500 component stocks have outperformed analyst expectations. During the same period, Morgan Stanley raised its 2026 S&P 500 EPS estimate to $339, a substantial increase of 23% year-on-year, and emphasized a bullish logic "coming from earnings growth, not valuation multiple expansion." J.P. Morgan also raised its 2026 S&P 500 EPS estimate from $315 to $330 in late April, with a 22% annual growth rate, and raised its target price to 7,600 points. Several top Wall Street institutions increased their profit expectations simultaneously, reflecting a strengthening consensus in the market on the sustainability of earnings growth. Q1 earnings exceeding expectations, "double surpass" rate hitting five-year high About 90% of S&P 500 component companies have completed first-quarter earnings disclosures. Bank of America data shows that EPS in the first quarter increased by about 26% year-on-year; even excluding one-time gains from Amazon, Meta, and Google, the increase was still 18%. Actual EPS for the first quarter reached $80.28, nearly $7 higher than Bank of America's initial forecast. A more noteworthy signal comes from the "quality" indicator. 64% of companies achieved "double surpass" of EPS and revenue exceeding market expectations, reaching the highest level in five years. This data indicates that the breadth and quality of corporate earnings growth are at high levels in recent years. The strong rebound in U.S. stock earnings is supported by solid data. The blended year-on-year earnings growth rate for the S&P 500 index in the first quarter of 2026 has soared to 27.1%, the highest since the fourth quarter of 2021. The performance of the three major tech giants - Alphabet, Amazon, and Meta - collectively accounted for 71% of the index's net earnings growth. An analyst at UBS Global Wealth Management's Chief Investment Office pointed out, "AI-related demand remains strong, cloud business revenue is accelerating significantly, and backlogs of orders are increasing significantly, all of which indicate that investment in data center infrastructure is yielding returns." However, beneath the "double surpass" data lies differentiation. Bespoke Investment Group's analysis shows that although the proportion of companies exceeding expectations has reached the top ten percent level in the past decade, the market returns for these exceedances are exceptionally modest. Investors' reward for exceeding expectations is much lower than the historical average, indicating that the market has already priced in these optimistic expectations, and future upward movement will rely more on earnings continuing to exceed the already adjusted expectations. Behind the surge in first-quarter earnings, the capital expenditures and commercialization logic of artificial intelligence continue to be validated. The four tech giants Amazon, Alphabet, Meta, and Microsoft collectively achieved revenue growth of 20% and profit growth of 61%. A Goldman Sachs analyst pointed out that analysts' total estimates for capital expenditures of AI mega operators in 2026 now amount to $751 billion, $80 billion higher than the estimate at the beginning of the earnings season, an increase of 83% compared to 2025, and this surge is also driving continuous upward revisions in profit expectations for AI infrastructure companies.