Nvidia and Micron fuel 48.8% tech earnings growth in Q2

The S&P 500 tech sector's 48.8% Q2 earnings growth hinges almost entirely on two chipmakers: Nvidia and Micron.

"Excluding the contribution from Micron and Nvidia, Q2 earnings for the rest of the Zacks Tech sector would be up 25.3% versus 48.8% otherwise," Sheraz Mian, director of research at Zacks Investment Research, said.

Micron already reported Q2 results with earnings surging 1,350% year over year on 346% higher revenue. Nvidia, which reports later this quarter, is expected to post similarly outsized gains. Together, the two companies account for such a large share of tech sector profits that removing them cuts the sector's growth rate in half.

The tech sector generates 41% of all S&P 500 earnings and accounts for 45.6% of the index's market capitalization. Excluding the sector entirely, total S&P 500 earnings growth drops to 14.1% from 25.3%. On an annual basis, removing Nvidia and Micron from the index reduces 2026 earnings growth to 15.5% from 22%.

Of the 49 S&P 500 members that reported through July 17, total earnings rose 48.7% on 15.1% higher revenue, with 91.8% beating EPS estimates and 79.6% beating revenue estimates — both near five-year highs. Excluding Micron's blockbuster quarter, the earnings growth rate for those 49 companies falls to 21.5% on 12.5% higher revenue, a level that still compares favorably with recent quarters.

The Magnificent Seven group, which includes Nvidia, is expected to post 28.7% Q2 earnings growth on 25.1% higher revenue. Even excluding all seven members, the rest of the S&P 500 would still show 24.3% earnings growth, indicating broad strength beyond mega-cap tech. This week's reporting docket includes more than 300 companies, including 85 S&P 500 members and two Magnificent Seven names: Tesla and Alphabet.

Beyond tech, the Energy sector leads all groups with 129.5% expected earnings growth, followed by Basic Materials at 45.2% and Finance at 23.5%. The Finance sector, the second-largest earnings contributor to the index at 16.4% of forward 12-month earnings, has seen 36.6% of its market cap report results so far, with earnings up 30.2% and all companies beating EPS estimates. JPMorgan, Bank of America, Citigroup and Wells Fargo all posted double-digit earnings growth, with Citigroup leading at 45.1%. Bank stocks have benefited as geopolitical risk factors have eased, with cyclical businesses gaining from reduced economic uncertainty.

The Q2 earnings beats percentage for the 49 reporting companies is a new five-year high, while the revenue beats percentage is close to the five-year record. Full-year 2026 earnings estimates have increased for 11 of the 16 Zacks sectors since March, with the most pronounced gains in Energy, Basic Materials, Tech, Industrials, Utilities and Business Services. On the negative side, estimates have been under pressure for Transportation, Autos, Medical and Consumer Discretionary sectors since March.

The data shows AI-driven semiconductor demand remains the dominant earnings catalyst in US equities. Investors will watch Nvidia's own Q2 report, expected in late August, for whether its data center revenue trajectory can sustain the sector's growth premium.

This article is for informational purposes only and does not constitute investment advice.