Barclays raised its year-end 2026 S&P 500 price target to 7,950 from 7,800 following second-quarter corporate earnings, while maintaining its 2027 target at 8,800.
The bank also increased its fiscal 2026 earnings-per-share estimate to $365 from $337 and its fiscal 2027 forecast to $414 from $389. Barclays’ base case assumes S&P 500 EPS growth of 30.8% in 2026 and a price-to-earnings multiple of 21.8 times.
S&P 500 headline EPS increased by more than 50% year over year during the second quarter, or 29.3% excluding one-time items, alongside sales growth of 13.3%.
Big Tech companies reported EPS growth of 35%, compared with 30% in the previous quarter, while earnings across the remainder of the technology sector increased 88%.
More Than 86% of S&P 500 Companies Beat Estimates
Strategists led by Venu Krishna said 86.2% of companies exceeded consensus estimates during the quarter, compared with a long-term median of 75% since 1998.
However, the strategists noted that “markets still penalized misses much more heavily than they rewarded beats this quarter,” which they linked to a higher hurdle rate amid elevated and rising yields.
Within Big Tech, Alphabet (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) accounted for most of the upside earnings surprise, while Meta (NASDAQ:META) missed expectations.
Barclays estimates that capital expenditure by hyperscalers will exceed $1.1 trillion in 2027, representing a 67% year-over-year increase. The bank expects Alphabet and Amazon to make the largest contributions, followed closely by Meta.
Barclays Keeps Valuation Assumptions Unchanged
Despite raising its earnings estimates, the strategists said their valuation assumptions remain “deliberately conservative.”
Under the bank’s sum-of-the-parts framework for 2026, Big Tech is assigned a price-to-earnings multiple of 23.0 times, compared with 22.0 times for the rest of the technology sector and 21.0 times for the remainder of the S&P 500.
“The result is that earnings do most of the heavy lifting in our target increase,” the strategists wrote.
Barclays’ bull-case target for the S&P 500 in 2026 is 8,350, while its bear-case target is 6,750. For 2027, the corresponding bull and bear scenarios are 9,800 and 7,800.
Barclays Downgrades Utilities to Neutral
Barclays downgraded its view of the Utilities sector to Neutral from Positive, citing regulatory issues including “failure to advance meaningful wildfire liability reform in California, and bipartisan pushback against data center permitting in several U.S. states.”
The bank maintained a Positive view on Technology, Media, and Telecommunications and Industrials. It remains Negative on the Consumer complex and Neutral on the remaining sectors.