S&P 500 Q2 Earnings Surge 31% YoY, Highest Since 1992

S&P 500 Q2 earnings rose 31% YoY, beating forecasts. AI drove margin expansion to 16%, compressing P/E ratios below 22 and triggering a valuation reset.

Woofun AI reports that S&P 500 second-quarter earnings grew 31% year-on-year, marking the strongest expansion since 1992 when excluding recessionary rebounds. This performance significantly exceeded the prior forecast of 23%. The primary catalyst was artificial intelligence shifting from a cost center to a profit driver, lifting net profit margins from 14% to nearly 16%. Consequently, the index's price-to-earnings ratio contracted from approximately 26 at the start of the year to below 22, indicating a valuation reset driven by earnings growth rather than multiple expansion.

Approximately three-quarters of reporting U.S. companies surpassed expectations for both earnings per share and revenue, with small and mid-cap outperformance reaching near-record post-pandemic levels. European firms recorded record net profit margins of 12%, while MSCI Europe earnings grew 18% year-on-year. Asia-Pacific earnings forecasts rose nearly 10% since June. Strategists increased full-year S&P 500 earnings growth projections from 15% to 27%, raising the average target price to 7,894 points. NVIDIA's upcoming earnings report is viewed as a critical test for the current earnings-driven bull market.