S&P 500 Heads Into Q3 Earnings Season With 29.5% Growth on the Tape

Third-quarter earnings season kicks off this week with the bar set higher than it was three months ago, and higher than almost any analyst dared pencil in at the start of the quarter.

According to FactSet data reviewed by CNBC, the S&P 500's blended earnings growth rate for Q3 2026 is expected to come in at 29.5% year over year. That would mark the third consecutive quarter of earnings growth above 25% for the index. Goldman Sachs has a slightly more cautious read, with analysts there projecting 27% growth, but the direction of travel is the same.

The setup looks unusual in one specific way. <cite index="20-6,20-7">Analysts actually increased earnings estimates for Q3 2026 during the quarter, pushing per-share earnings up 1.4% from June 30 to September 30.</cite> <cite index="20-8,20-9">In a typical quarter, analysts lower estimates. Over the past five years, earnings expectations have fallen by an average of 2.2% during any given quarter.</cite> The upward drift isn't noise -- companies drove it. <cite index="20-11,20-12,20-13">Both the number and percentage of S&P 500 companies issuing positive EPS guidance for Q3 2026 are above average. Of 116 companies that have issued guidance, 72 have issued positive EPS guidance versus 44 negative.</cite>

The growth isn't concentrated in the handful of mega-cap names that have carried prior cycles. <cite index="27-8">The other 493 stocks in the S&P 500 are forecast to deliver 27% year-over-year gains, according to Russell Investments.</cite> Energy leads sector estimates, followed by technology and communication services. <cite index="28-12">No sector is expected to report a year-over-year earnings decline.</cite>

There are pockets of genuine caution worth noting before the big-bank reports set the tone. <cite index="27-12">Eight of the 11 S&P 500 sectors have seen negative revisions to bottom-up EPS estimates since June 30, led by materials at minus 10.2%, consumer staples at minus 4%, and health care at minus 3.3%, according to FactSet.</cite> Rising bond yields and oil prices also complicate the picture for anyone hoping a strong earnings season translates cleanly into higher equity prices.

The M&A market offers a separate set of numbers worth reading alongside the earnings preview. WTW released its Q3 2026 Quarterly Deal Performance Monitor on October 8, and the headline figure -- deal value up 23.9% in the first nine months of 2026 -- flatters the underlying acquirer returns. <cite index="13-2,13-3">Global M&A activity accelerated during the first nine months of 2026, with WTW's monitor recording 614 completed deals worth at least $100 million during the period.</cite> <cite index="13-5">Mega deals valued at $10 billion or more recorded their strongest nine-month start on record, with 24 transactions completed compared with 11 during the equivalent period of 2025.</cite>

But volume and value are telling a different story than returns. <cite index="19-7,19-8">Acquirers in deals above $100 million completed during the third quarter underperformed the benchmark by 10.3 percentage points. Of 200 completed deals, 121 acquirers underperformed and only 79 outperformed.</cite> That's two consecutive quarters of underperformance for dealmakers against companies that stayed out of the M&A market. <cite index="6-4">North American dealmakers underperformed by 13.8 percentage points, completing 109 deals during the quarter.</cite>

The contrast between the corporate earnings picture and the M&A return picture is worth holding in mind as CEOs step up to explain their capital allocation decisions over the next six weeks. Organic earnings growth running near 30% raises the obvious question of whether bolt-on acquisitions -- or the mega-deals that have dominated 2026 -- actually improve on what staying put delivers. So far this year, for most buyers, they haven't.

Sources cited:
- FactSet Earnings Insight (https://insight.factset.com/sp-500-earnings-season-preview-q3-2026)
- CNBC (https://www.cnbc.com/2026/10/07/here-comes-third-quarter-earnings-season-booming-profits-could-propel-the-sp-500-to-new-heights.html)
- WTW Quarterly Deal Performance Monitor (via GlobeNewswire) (https://www.globenewswire.com/news-release/2026/10/08/3377298/0/en/global-m-a-market-hits-new-high-as-bigger-deals-dominate.html)
- Global Reinsurance (https://www.globalreinsurance.com/home/mega-deals-drive-global-manda-activity-to-new-high-wtw/1459911.article)
- Forbes / FactSet (https://www.forbes.com/sites/bill_stone/2026/10/04/sp-500-q3-earnings-preview-trends-investors-need-to-watch/)