Nvidia and Micron Drive S&P 500 Q3 Earnings Growth to 24%

Nvidia and Micron are the primary drivers of the S&P 500's projected 24% year-over-year earnings growth for the third quarter, marking the eighth consecutive period of double-digit index gains. As noted in The Globe and Mail, these two semiconductor firms account for a disproportionate share of the technology sector's performance, with their combined impact reducing the sector's growth rate by more than half if excluded.

Micron is forecast to see earnings surge 938% and revenues climb 348.6% in the current period, while Nvidia expects a 90% earnings increase and 91.2% revenue growth. This trajectory continues a recent record run for both companies, anchoring the broader market's positive outlook despite uneven performance across other industry groups.

Tech sector growth depends on chipmakers

The technology sector is slated for 41.9% earnings expansion, but this figure is heavily skewed by the two memory and graphics giants. Removing Nvidia and Micron from the calculation cuts the sector's growth rate by slightly more than half, revealing that the rest of the tech landscape is growing at a significantly slower pace. This concentration highlights a narrow source of momentum within an otherwise broad-based market.

Excluding the energy sector, which is projected to grow 111.9%, the overall S&P 500 earnings growth drops to 20%. If the tech sector is also removed, the remaining index components show a more modest 14.4% increase. These figures underscore that the headline growth rates are heavily dependent on a few high-performing industries rather than uniform strength across all 500 constituents.

Broad-based revisions support market outlook

Estimate revisions have remained positive for nearly a year, broadening from technology and energy to include transportation, finance, aerospace, industrials, utilities, and autos. Fourteen of the sixteen Zacks sectors are on track for positive earnings growth, with five expecting double-digit gains. This sustained upward adjustment in analyst estimates signals a steadily improving fundamental outlook across the board.

Conversely, eight sectors face downward pressure on estimates, including conglomerates, basic materials, and consumer staples. The conglomerates sector is the only one expected to see a decline, with earnings down 35.4% year-over-year, while consumer staples are projected to be flat. This divergence suggests that while the aggregate numbers are strong, the benefits of the earnings cycle are not distributed evenly across all business models.

Early reporting shows mixed results

The reporting cycle began in September with Oracle and Adobe, followed by Lennar, marking the first three S&P 500 members to release results. These companies reported combined earnings growth of 22.6% and revenue growth of 14.9%. While 33.3% of these firms beat earnings per share estimates, 66.7% exceeded revenue forecasts, indicating that top-line performance is currently outpacing bottom-line profitability in the early stages of the season.