Magnificent Seven's profits will exceed forecast, Goldman confident. What will the reports show?

"The "Magnificent Seven" US tech giants and companies in the S&P 500 will generally beat earnings expectations in the opening quarterly earnings disclosure season, Goldman Sachs said. It sees current Wall Street consensus forecasts as overly cautious amid a robust economy and a positive outlook for artificial intelligence. Barclays analysts in these conditions expect the continuation of a multi-month rally of the U.S. market.

Consensus forecasts are now "too conservative in light of macroeconomic data released during the quarter," Bloomberg quoted a note from a team of Goldman Sachs strategists led by David Costin. In his opinion, the technology giants of the "Magnificent Seven" - Alphabet (Google), Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla - will also beat market expectations.

On average, Wall Street estimates profit growth of 7.2% for companies in the S&P 500 index in the third quarter, according to data compiled by Bloomberg Intelligence. That's the lowest growth in two years. Despite this, stocks are approaching the reporting season at a record high.

Kostin is among the strategists who raised their year-end target for the S&P 500 Index when the negative effect of higher U.S. duties was weaker than previously expected, Bloomberg notes. And while the strategist expects the impact of the duties to be more significant in the third quarter, he said companies were likely able to maintain sales margins.

Morgan Stanley's Michael Wilson is also among the analysts with a bullish view on U.S. corporate earnings, Bloomberg reports. In an Oct. 6 research note, the strategist said the return of inflation in 2026 could boost companies' pricing power and corporate profits. "All the conditions are now in place for the return of positive operating leverage (shows how much a company's profits will change when revenue rises or falls. - Oninvest) - the likes of which we haven't seen since 2021," Wilson wrote.

Barclays Bank, which correctly predicted the September rise on Wall Street, allows an 82% probability that the S&P 500 index will continue to rise in October-November. September is traditionally considered the worst month for investors in U.S. stocks, but 2025 was the strongest in 15 years, Bloomberg notes.

U.S. companies have already started reporting earnings for the third quarter. But the full reporting season on Wall Street will begin in mid-October with the results of JPMorgan Chase, Citigroup and other major banks.

This article was AI-translated and verified by a human editor