S&P 500 Earnings Growth Projected at 24.6 Percent in First Quarter

Deutsche Bank's head of thematic research published a chartbook that examines market and political implications of the Iran conflict. One section addresses the first-quarter earnings season for U.S. companies.

Earnings have significantly exceeded consensus estimates across all metrics despite a high bar set for the period. S&P 500 earnings growth is projected to accelerate from 13.4 percent in the fourth quarter to 24.6 percent in the first quarter. That pace represents a four-year high and a level rarely seen outside of post-shock recoveries.

Excluding special factors, the growth rate is among the strongest in two decades. The AI boom has contributed to the results, but strength has been widespread. Double-digit growth appeared in both average and median companies, and all 11 sectors posted positive growth for the first time in four years.

Much of the performance has been driven by higher prices amid supply constraints, surging demand within the AI value chain, and other disruptions. In response to the robust first-quarter results, Deutsche Bank raised its 2026 EPS forecast from $320 to $342. The revision reflects strong first-quarter beats, performance in certain sectors, and higher oil and commodity prices.

The report notes that while the U.S. equity market has outperformed many markets since the start of the Iran conflict, this performance has moved it only from the bottom quartile to the middle of the global pack year-to-date. Tech performance over the past six months since the end of October shows only a modest increase even with a surge since the conflict began.

Other markets have shown notably better performance over the last 18 months. Given current high valuations, the strong earnings growth is helping the U.S. market grow into these valuations.