Aptus Musings: Q3 2026 Review

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Onward. 

S&P 500 Earnings Review - Q3 2026

Q3 2026 earnings have sharpened the core question for equity investors: growth is strong, but it’s no longer getting stronger. Even with a choppy macro backdrop and compressing multiples, we believe a rising earnings outlook has the S&P 500 on track for a fourth straight year of double-digit returns. Index EPS is set to grow 33% year-over-year (“YoY”) in Q3, tying Q2 as the best quarter in decades outside of a post-recession rebound. It likely marks a plateau in the recent run of acceleration, but a plateau at this altitude is a pretty good place to be.

Source: Aptus via Strategas; I/B/E/S data from Refinitiv. Data as of 11/10.26.

One of my favorite headlines regarding earnings from this past month was: "Trees Don't Grow into the Sky". And it certainly looks like we have some redwoods around us right now. The chart below just shows you how high they've gotten: 

But somehow, even with 84% of the S&P 500 companies beating estimates, overall earnings in Q3 will likely be remembered as a disappointment, specifically within Tech. A handful of cloud businesses are still compounding at huge growth rates on huge bases, but that wasn’t the story. Beyond the endless debates over returns, capital and free cash flow, the issue that stood out to me, for now anyway, was this: hyperscaler capex plans show no sign of slowing, yet several of the biggest names stumbled somewhere in their core business. And that's why a few hyperscalers were down a lot during the quarter. 

It's been known by many that capex has been the name of the game in the market - we've always said that one man's capex is another man's revenue. So AI capex has been rocket fuel for the past four years, and now the market is forced to seriously question the intensity of the buildout. That alone expands the possible distribution of outcomes, introducing more left tails into a market that was mostly chasing right tails.

This variable alone is what every investor is currently grappling with.

Source: Aptus Capital, Company 10-K/10-Q cash flow statements (2022-2025); company guidance midpoints as of Q3 2026 earnings (2026E); S&P Global projections (2027E).Microsoft and Meta guidance includes finance leases; historical figures are cash purchases of property and equipment. Excludes Oracle.

Step back from the noise, and the earnings picture is hard to ignore: Q2 EPS grew 33%, and Q3 is also tracking at 33%, the fastest pace in over 30 years outside of post-recession rebounds (excluding private investments). That pace is set to cool, and how much that matters is debatable. Historically, markets trade on the rate of change, but 18% S&P EPS growth next year would still historically favor the bulls. That tension between slowing growth and still-strong growth is what I keep wrestling with. My read is that if nominal growth stays above trend, earnings should hold up and keep supporting the market, though the risks rose this week given how sensitive our expectations are regarding AI capex. None of this is bad news, but it’s getting harder to see earnings delivering the same upside acceleration we’ve enjoyed in recent years.  

Disclosures

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward-looking statements cannot be guaranteed.

This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this commentary should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy. Investing involves risk. Principal loss is possible.

Advisory services are offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama. ACA-2611-16.