S&P 500 companies issue record upbeat earnings guidance

Seventy-two S&P 500 companies issued positive guidance for third-quarter earnings per share, the highest count recorded by FactSet since it began tracking the metric in 2006. This figure surpasses the previous record of 65 companies set in the second quarter of 2021. FactSet defines positive guidance as a company's own forecast exceeding Wall Street's average estimate from the preceding day.

The breadth of these forecasts is unusual, with 62% of the 116 S&P 500 companies providing third-quarter guidance pointing to higher results. This share significantly exceeds the five-year average of 40%. Conversely, only 44 companies guided lower, the fewest in any quarter since the third quarter of 2021.

The concentration of optimistic outlooks is heavily skewed toward the information technology sector. Forty-four of the 72 companies with positive guidance are in technology, led by 12 software makers and 11 chipmakers or equipment suppliers. This sector-specific total matches a record set in the second quarter of 2026 and stands well above the five-year average of approximately 24 companies per quarter. Tech companies alone provided more positive guidance this quarter than the entire index has averaged per quarter over the last five years, which is 42. FactSet expects technology sector earnings to rise 65% year over year, the second-fastest pace among the index's 11 sectors.

These company-specific forecasts, combined with upward revisions from analysts, have raised FactSet's estimate for the index's third-quarter earnings growth to 29.6% year over year as of its October 9 report. If realized, this would mark the third consecutive quarter of earnings growth above 25%. The S&P 500 currently trades about 1% below its October 6 closing high, with the Vanguard S&P 500 ETF (VOO) priced near $709 per share.

Valuation metrics reflect a split between historical profits and future expectations. Based on trailing twelve-month profits, the index's price-to-earnings ratio stands at approximately 26, above its ten-year average of about 24. However, using forward earnings estimates for the next twelve months, the ratio drops to about 19, aligning with its ten-year average. The validity of this lower multiple depends on whether current analyst forecasts are met.

The market structure amplifies the impact of technology sector performance. Technology stocks represent around 39% of the Vanguard S&P 500 ETF, and its three largest holdings, all tech companies, account for about a fifth of the fund. Because the index weights members by size, performance in these large tech firms drives a significant portion of index returns. A potential cooling in artificial intelligence spending could lead these companies to cut forecasts first.

Historical context suggests that a record guidance quarter does not guarantee immediate price appreciation. The S&P 500 finished June 2021, the end of the previous record quarter, at approximately 4,298. The index continued to rise for about six months before sliding roughly 25% by October 2022. Despite that drawdown, the index is currently around 80% above its June 2021 close.