Third-quarter earnings season is gathering pace, and the bar for U.S. companies is high. Analysts expect S&P 500 earnings to rise 29.5% from a year earlier, according to a season preview published by FactSet on October 2. If that growth is realized, it would be the third consecutive quarter above 25% and the eighth straight quarter of double-digit growth.

The figure is notable because of how it moved. On June 30, the expected growth rate for the quarter stood at 26.7%. Rather than being cut as the quarter progressed, forecasts were raised.

Estimates Rose Instead of Fading

Analysts typically trim their profit forecasts as a quarter unfolds. FactSet data shows that Q3 estimates rose 1.4% between June 30 and September 30. By comparison, the average change during a quarter has been a decline of 2.2% over the past five years and 2.5% over the past 10 years.

That upward drift suggests analysts have been chasing results higher, not lowering expectations ahead of the reports. It also raises the stakes for companies: when forecasts are elevated, results that merely meet them may not satisfy investors.

Revenue Growth Also Strong

Sales are expected to grow 12.3% year over year, up from 10.9% on June 30. If realized, that would mark a third straight quarter of double-digit revenue growth. Revenue is a useful cross-check on earnings, because profit growth that outpaces sales can reflect cost cuts, buybacks or accounting effects, while sales growth points to underlying demand.

Sector Picture

All eleven S&P 500 sectors are projected to report earnings growth for the quarter, according to FactSet. Five are expected to post double-digit increases, led by:

  • Energy
  • Information Technology
  • Communication Services
  • Materials

On revenue, all eleven sectors are also expected to grow, with Information Technology, Energy and Communication Services leading. Technology therefore sits at the top of both lists, which keeps attention on large technology names as their reports arrive.

Guidance Tilts Positive

Companies that give forward earnings guidance offer a window into management confidence. FactSet counted 116 S&P 500 companies that had issued earnings-per-share guidance for Q3: 72 positive and 44 negative. The 72 positive notices compare with a five-year average of 42 and a 10-year average of 40. The positive share, at 62%, is well above the five-year average of 40% and the 10-year average of 41%.

Guidance of this kind is not a guarantee of results, but it indicates that more companies than usual felt comfortable setting upbeat targets heading into the quarter.

Valuation Below Long-Run Averages

Even with stocks near record levels, the market is not priced at an extreme on forward earnings, based on FactSet’s figures. The forward 12-month price-to-earnings ratio for the S&P 500 was 19.0, below both the five-year average of 19.8 and the 10-year average of 19.1. It was also lower than the 20.4 reading at the end of June. In practice, rising earnings expectations have outpaced the rise in prices, which pulls the multiple down.

That does not make stocks cheap, and the valuation depends on analysts’ forecasts holding up. If profits disappoint, the ratio would climb mechanically even without a move in prices.

Looking Past the Quarter

Analysts are looking for the strength to persist. FactSet reported expected earnings growth of 27.6% for the fourth quarter and 32.4% for calendar year 2026. Those projections will be revised as companies discuss the outlook on their calls, and management commentary on demand, costs and interest rates may carry as much weight as the quarterly numbers themselves.

What to Watch as Reports Arrive

  • The size of beats: With estimates already elevated, the magnitude of upside surprises will matter more than whether a company simply tops the consensus.
  • Guidance for Q4: A continued positive tilt would support the 27.6% fourth-quarter forecast, while cautious outlooks could trigger revisions.
  • Rate and yield sensitivity: Long-term Treasury yields have climbed sharply this month, which can pressure valuations even when profits are strong.
  • Technology leadership: Because the sector leads on both earnings and revenue growth, its results can sway index-level outcomes.

Earnings season runs for several weeks, with most S&P 500 companies reporting by mid-November. Early results offer a partial view, and the picture can change as larger reporters weigh in.

This article is for informational purposes only and is not investment advice.

Sources: FactSet Insight; Penn Mutual Asset Management.