As third quarter earnings reports for nearly all S&P 500 companies have now been submitted, the index is on track to record an earnings growth rate of 13.4%. This encouraging trend is highlighted by FactSet analyst John Butters, who notes that an impressive 83% of reporting companies have exceeded earnings expectations. However, it is the revenue growth this quarter that has garnered significant attention, with S&P 500 companies experiencing their highest revenue growth rate in three years.
Should current numbers hold, the blended revenue growth rate of 8.4% for Q3 would mark the highest performance since last year’s third quarter, when the index achieved a revenue growth rate of 11%. The standout sectors driving this revenue surge include Health Care, Financials, and Consumer Discretionary. Notable contributors to this success include industry giants such as Cardinal Health, Morgan Stanley, Ford, Amazon, and Tesla, among others.
Conversely, the earnings growth among leading tech firms—the “Magnificent Seven”—has begun to show signs of slowing down. Following the earnings release from Nvidia, the last of this high-profile group to report, Butters has pointed out that their combined earnings growth for the third quarter is 18.4%. This marks the lowest growth rate for the “Magnificent Seven” since the first quarter of 2023. Companies in this group include stalwarts like Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia.
Butters explains that the underperformance of the Magnificent Seven compared to analyst expectations can largely be attributed to a significant earnings surprise reported by Meta Platforms, which disclosed earnings of $1.05 per share against an anticipated $6.72. Despite the overall decline in growth rate, four of these companies—Nvidia, Alphabet, Amazon, and Microsoft—remain among the top contributors to earnings growth for the S&P 500 this quarter.
The overall performance of S&P 500 companies in terms of both earnings and revenue reflects a complex and evolving landscape as diverse industry sectors grapple with market dynamics and shifting consumer behaviors.
