Wall Street Usually Cuts Its Estimates. This Year, It’s Raising Them.
Each year tends to follow a similar script on Wall Street. Analysts start the year optimistic about how much profit companies will earn, then spend the following quarters trimming those forecasts as actual results come in.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | Wall Street Usually Cuts Its Estimates. This Year, It’s Raising Them.
Figure 1, which tracks the S&P 500 earnings estimates for each calendar year over the prior two years, shows the pattern. As an example, analysts would start tracking 2026 earnings estimates at the start of 2025, two years ahead of time. For comparison purposes, the starting point for each year is set to 100. The gray dashed line shows the average path over the last 20 years. It slopes steadily down and ends about -8% below where it began, highlighting how analysts often revise their estimates to match results and corporate guidance. In contrast, the two darker lines, which graph the estimates for 2026 and 2027, are doing the opposite. Both have risen more than +10% since tracking began. Analysts are raising their earnings estimates this cycle, not cutting, which stands out against two decades of history.
This year is different because actual earnings results have been strong. Analysts have consistently raised their estimates to keep pace with what companies are reporting, with profits repeatedly coming in ahead of expectations. The S&P 500 is on track for its seventh straight quarter of double-digit earnings growth. The technology sector is a major contributor, as heavy investment in artificial intelligence produces sales and earnings growth, but the strength reaches beyond it as well. More than 85% of S&P 500 companies have beaten their Q2 earnings estimates, above the five-year average of 78%. The strength is even more notable given the backdrop, which includes the Middle East conflict, volatile oil prices, and lingering inflation.
The stock market’s strong returns in recent years have been powered by real earnings growth, not just investor enthusiasm. The chart shows that analysts expect the strength to continue, with forecasts calling for another year of double-digit earnings growth in 2027. Much of the outlook rests on the AI buildout, where the largest tech companies are expected to continue spending heavily on infrastructure. Analysts also point to the wider economy, with expectations for steady economic growth and a productivity boost as more companies implement AI in their operations. However, none of this guarantees a smooth ride. When expectations run this far above normal, they set a high bar. Companies now have to deliver on forecasts that already assume a lot of good news. Volatility along the way is almost certain, but it’s the price of admission for the returns stocks provide. For long-term investors, the point is simple: prices follow earnings, not headlines.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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Chart of the Month | Wall Street Usually Cuts Its Estimates. This Year, It’s Raising Them.
Wall Street Usually Cuts Its Estimates. This Year, It’s Raising Them.
Each year tends to follow a similar script on Wall Street. Analysts start the year optimistic about how much profit companies will earn, then spend the following quarters trimming those forecasts as actual results come in.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | Wall Street Usually Cuts Its Estimates. This Year, It’s Raising Them.
Figure 1, which tracks the S&P 500 earnings estimates for each calendar year over the prior two years, shows the pattern. As an example, analysts would start tracking 2026 earnings estimates at the start of 2025, two years ahead of time. For comparison purposes, the starting point for each year is set to 100. The gray dashed line shows the average path over the last 20 years. It slopes steadily down and ends about -8% below where it began, highlighting how analysts often revise their estimates to match results and corporate guidance. In contrast, the two darker lines, which graph the estimates for 2026 and 2027, are doing the opposite. Both have risen more than +10% since tracking began. Analysts are raising their earnings estimates this cycle, not cutting, which stands out against two decades of history.
This year is different because actual earnings results have been strong. Analysts have consistently raised their estimates to keep pace with what companies are reporting, with profits repeatedly coming in ahead of expectations. The S&P 500 is on track for its seventh straight quarter of double-digit earnings growth. The technology sector is a major contributor, as heavy investment in artificial intelligence produces sales and earnings growth, but the strength reaches beyond it as well. More than 85% of S&P 500 companies have beaten their Q2 earnings estimates, above the five-year average of 78%. The strength is even more notable given the backdrop, which includes the Middle East conflict, volatile oil prices, and lingering inflation.
The stock market’s strong returns in recent years have been powered by real earnings growth, not just investor enthusiasm. The chart shows that analysts expect the strength to continue, with forecasts calling for another year of double-digit earnings growth in 2027. Much of the outlook rests on the AI buildout, where the largest tech companies are expected to continue spending heavily on infrastructure. Analysts also point to the wider economy, with expectations for steady economic growth and a productivity boost as more companies implement AI in their operations. However, none of this guarantees a smooth ride. When expectations run this far above normal, they set a high bar. Companies now have to deliver on forecasts that already assume a lot of good news. Volatility along the way is almost certain, but it’s the price of admission for the returns stocks provide. For long-term investors, the point is simple: prices follow earnings, not headlines.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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