Strong Earnings, But Is Big Tech Doing Too Much of the Heavy Lifting?
At first glance, this earnings season looks like a clear win for corporate America.
Nearly 89% of S&P 500 companies have reported first-quarter results, and the numbers have been hard to ignore. According to FactSet, 84% of companies have beaten earnings expectations, while overall profits are tracking 27.7% higher than a year ago, which would mark the strongest quarterly earnings growth since late 2021. Revenue growth has also been solid at 11.3%, another sign that demand has held up better than many expected.
On the surface, that paints a pretty bullish picture.
But once you dig beneath the headline numbers, a more interesting question starts to emerge. Is this really a broad-based earnings recovery, or are a handful of mega-cap technology names making the quarter look stronger than it actually is?
That question matters, because right now there's a growing sense that the market is leaning on the same leadership group once again.
The Big Names Are Making a Big Difference
FactSet's own data points to three companies in particular: Alphabet, Amazon.com, and Meta Platforms.
Since the end of March, those three have been the biggest contributors to the jump in overall S&P 500 earnings growth. In fact, the index's expected earnings growth rate has risen from 13.1% at quarter-end to 27.7% today, and a large chunk of that improvement has come from those names.
That's not entirely surprising.
Alphabet continues to benefit from cloud growth and AI-related demand. Amazon is still seeing strong momentum in both retail and AWS. Meta, meanwhile, has quietly become one of the market's most efficient profit machines again, with digital advertising and AI monetisation both supporting margins.
The result is that sectors tied closely to these businesses look exceptional. Communication Services is growing earnings at 48.8%, while Consumer Discretionary is up 39.7%. On paper, those are huge numbers.
But the story changes once you start taking the biggest winners out.
Strip Out the Leaders, and Things Look More Normal
This is where the quarter becomes more interesting.
If you remove Alphabet and Meta from Communication Services, the sector doesn't post explosive growth anymore. It actually swings into an earnings decline of 4.6%. Remove Amazon from Consumer Discretionary, and earnings growth drops from 39.7% to 14.9%.
That doesn't mean the rest of the market is weak. Far from it.
FactSet shows 10 of the 11 S&P sectors are still reporting year-on-year earnings growth, and all 11 sectors are showing revenue growth. Financials have quietly delivered strong numbers, helped by names like JPMorgan Chase & Co. and Citigroup Inc., while industrials and materials have also contributed.
So no, this isn't just a "Big Tech only" quarter.
But it is fair to say that the headline numbers look a lot more dramatic because of a small group of dominant companies.
Without them, earnings still look healthy. They just stop looking spectacular.
The Bigger Market Question
That leaves investors with a bigger question than earnings itself.
If the market is once again relying on a narrow group of AI-linked giants to drive both profits and index performance, what happens if that leadership stumbles?
That risk matters more now because valuations are no longer cheap. FactSet shows the S&P 500 is trading on a forward P/E of 21 times earnings, above both its five-year and ten-year averages. At the same time, many of the hyperscalers are pouring billions into AI infrastructure, data centres, and chips, with Goldman estimating hyperscaler capex could rise more than 80% this year.
For now, the market doesn't seem concerned. The S&P 500 and Nasdaq Composite both hit fresh highs last week, helped by AI optimism and strong earnings momentum.
But this quarter does reveal something important.
The earnings season is genuinely strong. That part is real.
The question is whether the market is seeing broad corporate strength… or simply another reminder that, in 2026, a handful of mega-cap companies still carry more weight than almost everything else.
References
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
These materials constitute marketing communication and do not take into consideration your personal circumstances, investment experience or current financial situation. The content is provided as general market commentary and should not be construed as containing any type of investment advice, investment recommendation and/or a solicitation for any investment transactions. This market communication does not imply or impose an obligation on you to perform an investment transaction and/or purchase investment products or services. These materials have not been prepared in accordance with legal requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research.
FXCM, and any of its Affiliates, shall not in any way be liable to you for any inaccuracies, errors or omissions, regardless of cause, in the content of these materials, or for any damages (whether direct or indirect) which may arise from the use of such materials, services and their content. Consequently, any person acting on them does so entirely at their own risk. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.