Barclays analysts say Big Tech remains at the heart of U.S. corporate earnings strength, continuing to outperform expectations and driving upward revisions to full-year forecasts for the S&P 500.
In a recent U.S. Equity Insights report, the bank stated that “Big Tech continues to defy expectations,” highlighting the group’s average earnings beat of 12%, year-over-year EPS growth of 27%, and a 190 basis point improvement in net profit margins.
“FY25 consensus has rebounded to $267,” analysts noted, after nearing Barclays’ own lower projection of $262 in June. The rebound has been fueled by “beat-and-raises from Big Tech and Financials,” the note added.
According to Barclays, as of last Friday, about two-thirds of the S&P 500’s market capitalization had reported Q2 results, with 82% topping analyst estimates—well above the long-term average of 76%. The average earnings surprise came in at 8.5%, led by discretionary stocks (helped by Amazon (NASDAQ:AMZN)), along with strong showings from the real estate and financial sectors. In total, S&P 500 EPS grew 8.5% year-over-year, with revenue growth of 5.3%.
Still, the analysts cautioned that outside of the tech giants, the broader earnings picture looks less robust. “SPX ex-Big Tech EPS growth looks like it’s slowing for the second straight quarter,” they said, pointing to downward estimate revisions in materials, utilities, and healthcare sectors.
Despite persistent concerns about high valuations, Barclays remains optimistic about Big Tech and Financials. The S&P 500 is currently trading at around 23 times next-twelve-month EPS, with Big Tech at approximately 29x.
“While ~29x NTM is high, the premium vs. SPX is modest, valuations are still down YTD and EPS estimates are improving,” the analysts wrote.
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