The most dangerous words in investing are āthis time is different.ā This weekās Chart does show us something that looks different. You can decide if it is.
Sell-side analysts almost always start the year too optimistic, then walk their numbers down as reality sets in. Over the past 20 years, the bottom-up EPS estimate for a given quarter has fallen an average of 4.2% while that quarter was still in progress. Down over five years (2.0%). Down over ten (2.7%). Down basically always.
2026 seems to have broken the pattern. Analysts raised the Q2 estimate by 3.4% during the quarter, the largest in-quarter increase since 2021. The full-year 2026 number climbed 6.3% in just three months, from about $320 to $340 per share. That green line in the Chart is heading up while every historical version heads down.
So whatās driving it? Two things, mostly. Energy estimates for the year jumped 41% on firmer prices. And the AI infrastructure trade kept feeding on itself, with Information Technology and Communication Services full-year estimates up 9% and 12%, respectively. Companies are guiding higher too. Of the S&P 500 names that gave Q2 guidance, 57% guided up, against a 41% norm. And revenue backs up the profit story: Q2 sales are tracking 12.2% growth, the best in three years. So thereās a real business underneath the optimism.
But hereās where I get nervous. This growth is narrow. Nine of eleven sectors saw their 2026 estimates rise, but the dollars are quite lopsided. Three companies, Alphabet, Amazon, and Meta, account for roughly 70% of the entire increase in 2026 earnings expectations. Strip out a handful of names and the picture goes back to ordinary.
The full-year number is genuinely big: 24% expected growth, against just under 10% in 2024 and about 12% in 2025. Call it what it is. A small group of enormous companies hoping (promising?) to earn their way into some very large capital expenditure budgets. Those same three have guided to combined 2026 capex of roughly half a trillion dollars. The estimates assume that spend turns into profit, on schedule.
Maybe it does. A lot is going right, and Iām not betting against these franchises. But concentrated growth is concentrated risk, dressed up as an index. When three stocks carry the number, three disappointments carry it back down. The estimates went up for once. They can still come down the ordinary way.
Sources: FactSet Earnings Season Preview: Q2 2026 Ā· FactSet: Largest Increases to Quarterly EPS Estimates Since 2021 Ā· 24/7 Wall St: Just 3 Companies Drive 70% of the S&P 500ās 2026 Growth Expectation