A Pivotal Earnings Week
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A Pivotal Earnings Week

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Barbara Reinhard

Barbara Reinhard, CFA

CIO, Multi-Asset Strategies and Solutions

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This week represents one of the largest concentrations of earnings in the 1Q26 reporting season. Approximately 42% of the S&P 500 market cap is set to report, alongside 36% of constituent companies. As of Friday the 24th, the blended YoY earnings growth rate for the quarter stood at 15.1%, a meaningful step up from the 13.1% expected at the start of the period. If sustained, this would mark the sixth consecutive quarter of double-digit earnings growth. But is OpenAI’s recent stumble a sign that AI is running out of gas? 

Not necessarily. Earnings strength this quarter has been led by the Technology, Materials, and Energy sectors. At the same time, sentiment around hyperscaler capex has turned constructive again following the announcement of Anthropic’s Mythos model. There are growing signs that paid AI adoption across the workforce is beginning to inflect higher—again, with Anthropic the primary winner.

The history of tech transformation is littered with tales of early pioneers that were left by the wayside on the road to widespread adoption. While it’s too early to declare the AI model race over, the potential persists for volatility in names associated with the AI narrative—especially given the considerable codependencies and interlinked investments among model companies, semiconductor companies, and data center providers. The pressure comes as success is increasingly defined by investors in terms of execution, adoption, and returns on invested capital. 

Outside of the usual technology suspects, AI’s ability to enhance scale and efficiency should disproportionately benefit larger, more established companies, deepening competitive moats. Against this backdrop, we continue to favor high-quality businesses with durable pricing power and operational flexibility to navigate a more demanding earnings environment. This is reflected in the performance of long/short quality factors, which have consistently demonstrated resilience, particularly during periods of market stress. 

Sebastian Teper contributed to this article. Data quoted is sourced from Bloomberg and FactSet.

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