Zacks Earnings Trends Highlights: NVDA and MSFT

Zacks projects S&P 500 Q4 earnings to rise +6.9% YoY on +7.7% revenue growth, but that headline is heavily skewed by Tech: the sector is forecast to deliver +13% earnings growth on +15.8% revenues (its 10th consecutive quarter of double‑digit earnings growth) and the ‘Magnificent 7’ are expected to post Q4 earnings up +16.6% on +16.2% revenue gains; excluding Tech (or the Mag 7) aggregate Q4 earnings growth falls to roughly +3.6% (or +3.4%). Aggregate estimate revisions for Q4 have turned modestly negative recently, yet Tech’s revisions remain positive and the sector is expected to provide nearly half of S&P earnings growth in 2026, highlighting concentration risk and the market’s reliance on a small group of large-cap tech names.

Analysis

Zacks projects S&P 500 Q4 earnings to rise +6.9% year‑over‑year on +7.7% higher revenues, following +13.9% earnings growth in 2025 Q3 on +7.8% revenue growth. The aggregate revisions trend for 2025 Q4 has turned modestly negative in recent weeks after earlier positivity, signalling growing uncertainty beneath the headline.

The Technology sector is the primary driver: Q4 Tech earnings are expected to increase +13% on +15.8% revenue growth — the tenth consecutive quarter of double‑digit Tech earnings growth — and Tech is forecast to account for almost half of S&P 500 earnings growth in 2026. The ‘Magnificent 7’ alone are projected to post Q4 earnings up +16.6% on +16.2% revenue gains, and excluding this group aggregate Q4 earnings growth falls to roughly +3.4–3.6%, underlining concentration risk given Tech’s 35.6% share of four‑quarter earnings and 44.6% of market cap.

Positive estimate revisions are concentrated in Tech (with firms such as NVIDIA and Microsoft highlighted), but Zacks cautions the “first wave” of AI leaders may level off; a reversal in Tech revisions or disappointing guidance from the Mag 7 would materially weaken headline S&P earnings momentum and market sentiment.

Key Decisions for Investors

• Maintain selective overweight to high‑quality large‑cap Tech (e.g., NVDA, MSFT) given their outsized earnings contribution and positive revisions, but limit individual position sizes to control concentration risk
• Use tactical protection (protective puts or collars) ahead of Q4 prints for concentrated Tech exposures and watch revision trends closely since aggregate Q4 revisions have turned modestly negative
• Begin selectively adding non‑Tech S&P names or cyclicals on signs of continued revision deterioration, because ex‑Tech earnings growth is only ~3.4–3.6% and could rerate if Tech momentum slows
• Monitor weekly Zacks estimate‑revision data and company guidance; if Tech revisions roll over, reduce portfolio beta and reallocate toward defensive or diversified exposures