Zacks Earnings Trends Highlights: Nvidia and Micron

S&P 500 Q2 earnings are now expected to rise 22.3% year over year on 11.0% higher revenues, with 11 of 16 Zacks sectors projected to post positive earnings growth. The revisions trend remains constructive, though Energy is a major upside driver and could see estimates ease if oil prices fall after Iran-war-related spikes; Tech remains a key growth engine, with NVDA and MU materially supporting sector earnings. Full-year 2026 S&P 500 earnings are expected to grow 21.1%, or 12.6% excluding Tech.

Analysis

The key market signal is not simply “earnings are strong,” but that the breadth of upward revisions is now doing more work than the headline growth rate. That matters because multiple expansion can persist when estimates are being ratcheted higher across a wide swath of sectors, but tends to stall once leadership narrows to a few mega-cap names. The current setup still favors quality growth, yet the index-level earnings story is increasingly dependent on a small handful of AI-linked winners, which makes dispersion the most important portfolio variable over the next 1-3 quarters.

Energy is likely to become a negative contributor to consensus momentum, but that is not automatically bearish for the index. Because the sector’s earnings weight is now modest, downward revisions there may be offset by continued strength in Tech, Finance, and parts of Industrials/Utilities; in fact, weaker oil can be a net input-cost tailwind for broad-margin businesses and consumer-exposed names. The second-order effect is that the “good news” from Energy rolling over may actually improve the durability of non-energy margins, especially in sectors where pricing power has been mixed.

The more interesting contrarian angle is that the market may be underestimating how much of the current S&P earnings growth is artificially concentrated in a few semiconductor names. If AI capex normalizes or hyperscaler spending pauses, the downgrade risk is concentrated and fast-moving, while the rest of Tech would not be enough to keep index revisions intact on its own. That creates a fragile but tradable regime: strong index-level numbers, but elevated single-name and subsector dispersion underneath.

Near term, the catalyst path is asymmetric. Over the next several weeks, any moderation in oil should pressure Energy estimates without materially harming the index, while the real risk to the bull case is a slowdown in AI-related capex commentary or a digestion period after prior estimate upgrades. Over a 3-6 month horizon, the market likely rewards relative earnings revision momentum over absolute growth, which argues for owning the revision winners and fading sectors where the estimate trend is deteriorating.

Key Decisions for Investors

• Stay overweight NVDA and MU versus the broad market over the next 1-3 months; the risk/reward remains favorable while estimate revisions are still rising, but size modestly because consensus is already crowded and a capex pause would hit fast.
• Initiate a pair trade: long MSFT/GOOGL/AMZN basket vs short TSLA on a 2-4 month horizon; hyperscalers have more durable earnings visibility, while TSLA remains more exposed to estimate compression and multiple fragility.
• Use any 1-2 week bounce in XLE-related names to fade Energy via a relative-value short versus a broad cyclicals basket; the trade works if crude continues normalizing and Energy revisions roll over without dragging the index.
• Buy downside protection on NVDA or SOXX into the next hyperscaler earnings/capex commentary window; the convexity is attractive because the index can absorb weakness, but semis cannot if the AI spend narrative cracks.
• Rotate incremental long exposure into sectors with positive revision trend but less crowded ownership, such as Industrials or Utilities, on a 1-2 quarter view; they offer better upside-to-compression risk than the mega-cap consensus trade.