by Levin Stamm
US companies are set to enjoy a better-than-expected earnings season as a robust economy and a solid outlook for artificial intelligence have left estimates looking too low, according to Goldman Sachs Group Inc. strategists.
The team led by David Kostin says consensus estimates are now “too conservative in light of economic data during the quarter.” They also expect the so-called Magnificent Seven group of technology heavyweights to beat expectations.
Analysts tracked by Bloomberg Intelligence expect S&P 500 profits to have risen 7.2% in the third quarter, the smallest increase in two years. Sales growth is also projected to slow to 5.9% from 6.4% in the previous quarter.
The S&P 500 has rallied to record highs ahead of the reporting season on optimism around resilient economic growth at a time when the Federal Reserve is cutting interest rates. Renewed enthusiasm around AI is also lifting sentiment. Third-quarter results will kick off in mid-October with reports from banks including JPMorgan Chase & Co. and Citigroup Inc.
Kostin is among strategists who raised their year-end targets for the S&P 500 in recent months, taking into account a smaller impact from sweeping US tariffs. While the strategist expects a bigger hit from levies in the third quarter, he said companies have likely maintained profit margins.
Morgan Stanley’s Michael Wilson is also among the more bullish forecasters on US earnings. In a note on Monday, the strategist said a potential return in inflation next year is poised to boost pricing power and corporate profits.
“The stage is now set for positive operating leverage to return in a way we haven’t witnessed since 2021,” Wilson wrote.
© 2025 Bloomberg L.P.