Is AI Starting to Pay Off? 85% of S&P 500 Q2 Earnings Beat Expectations, Tech Profits Surge Over 70%

U.S. corporate earnings for the second quarter have shown strong performance, with 85% of the 60% of companies that have reported so far exceeding profit expectations. Overall corporate earnings grew 47.7% year-on-year, with the technology sector leading the pack with an extraordinary 70.5% growth rate. Morgan Asset Management指出, this indicates that earlier market concerns about slowing growth have not materialized, and substantial investments in artificial intelligence are now beginning to convert into operational revenue. Earnings momentum is also gradually spreading from the tech sector to other industries such as finance, industrials, and materials.

Despite facing headwinds in Q2 from tariff policies, interest rate uncertainty, and elevated valuations—leading to increased market volatility—U.S. equities demonstrated solid fundamentals by the end of July. Reported earnings on average came in nearly 7% above analysts’ initial forecasts, proving that market fears over slowing earnings growth were overblown.

Polly Pu, Portfolio Manager of JPMorgan U.S. Technology Fund, stated that technology stocks remain the standout performers this quarter. Tech sector revenues grew 35.2% in Q2, with profits up 70.5% year-on-year—more than 10 percentage points above market expectations. This not only outpaces most other industries but also confirms growing market confidence in the return on AI investments. The massive capital expenditures made over the past year are now clearly reflected in revenue and profit performance, marking the official transition of AI-related businesses from the early investment phase to the revenue realization phase.

Beyond the strength of the tech sector, financials, industrials, materials, and consumer discretionary industries all maintained double-digit profit growth. Financials posted 22.6% year-on-year profit growth, industrials 15.4%, materials 40.3%, and consumer discretionary surged 88.8%. This demonstrates that earnings momentum is increasingly spreading beyond the tech sector. In industries such as healthcare, technology, finance, industrials, and materials, over 80% of companies delivered results above market expectations.

Pu emphasized that enterprise investments driven by AI are gradually transforming into operational results, providing strong support for the medium- to long-term performance of U.S. equities. Non-tech companies that are already leveraging AI to boost profitability—such as those in finance and consumer sectors—are emerging in the market. As AI transitions from hardware demand to real-world applications, the advantages of active management will become even more pronounced.