As earnings season prepares to kick off next week with results from major banks, Wall Street analysts are growing increasingly optimistic about what 2026 holds for corporate America. For the first time since 2018, all 16 sectors of the S&P 500 are expected to post positive earnings growth this year—a broad-based improvement that could support equity valuations after two years of concentrated gains.

The outlook represents a meaningful shift from the past several years, when earnings growth was heavily skewed toward a handful of technology giants while traditional sectors struggled with inflation, supply chain disruptions, and higher interest rates. Now, according to Zacks Investment Research, the rising tide appears poised to lift all boats.

Sector-by-Sector Breakdown

Leading the charge is the Aerospace sector, forecast to deliver a stunning 38.2% earnings growth in 2026. The defense industry is benefiting from President Trump's proposed $1.5 trillion military budget for fiscal 2027, while commercial aviation continues its post-pandemic recovery with airlines reporting strong booking trends.

Other standout sectors include:

  • Autos: +22.6% growth, driven by stabilizing EV investments and resilient consumer demand
  • Basic Materials: +20.3%, as commodity prices normalize and industrial activity picks up
  • Technology: +19.9%, with AI-related spending continuing to drive revenue
  • Transportation: +13.6%, reflecting improved supply chain efficiency
  • Industrials: +11.1%, benefiting from infrastructure spending and reshoring trends

The Magnificent 7 Still Matter—But Less So

The so-called Magnificent 7 stocks—Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla—will remain significant drivers of index-level returns, but their outsized influence is moderating. For Q4 2025, these seven companies are expected to deliver 17.3% earnings growth on 16.5% higher revenues. While impressive, that compares to 4.6% growth for the remaining 493 companies—a gap that's narrowing.

"The outlook for corporate earnings has been improving in recent quarters, as reflected in steadily rising earnings estimates. The broadening of growth beyond tech is a healthy development for market sustainability."

— Sheraz Mian, Director of Research, Zacks Investment Research

Q4 2025 Preview: Setting the Stage

Before we get to 2026's expected bounty, companies must first deliver their fourth-quarter 2025 results. The numbers look solid: S&P 500 firms are expected to report year-over-year earnings growth of 8.3% on 7.6% revenue gains, marking the 10th consecutive quarter of positive earnings growth.

The Technology sector continues to dominate, accounting for 35.9% of total index earnings and 43.1% of market capitalization. Tech earnings are forecast to rise 15.4% in Q4, the tenth straight quarter of double-digit growth. But the story increasingly extends beyond Silicon Valley.

2026 Quarterly Projections

Wall Street's expectations for 2026 build throughout the year, with analysts projecting accelerating growth as new initiatives take hold and year-over-year comparisons become more favorable:

  • Q1 2026: +13.1% earnings growth, +8.2% revenue growth
  • Q2 2026: +14.6% earnings growth, +7.3% revenue growth
  • Q3 2026: +14.7% earnings growth, +6.5% revenue growth
  • Q4 2026: +18.1% earnings growth, +7.3% revenue growth

The pattern suggests margin expansion through the year, as companies benefit from operating leverage and moderating cost pressures. Revenue growth, while solid, trails earnings growth—indicating that corporate America has become increasingly efficient at converting sales into profits.

What This Means for Your Portfolio

The broad-based earnings improvement has several implications for investors:

Diversification Makes Sense Again

For the past two years, index concentration in a handful of mega-cap tech stocks made diversification feel like a drag on returns. If 2026 unfolds as expected, that dynamic could reverse. Small-cap stocks, value names, and cyclical sectors have struggled relative to growth stocks—but positive earnings revisions could spark a rotation.

Valuations Come Into Focus

With the S&P 500's Shiller PE ratio recently touching 40 for only the second time in 155 years, valuation concerns are legitimate. However, if earnings growth accelerates as projected, current multiples become more defensible. A 15% increase in earnings at flat stock prices would bring the forward PE from roughly 22x to 19x—much closer to historical norms.

Sector Rotation Opportunities

Investors who've been heavily weighted toward technology may want to consider rebalancing into sectors where earnings momentum is improving but hasn't yet been fully reflected in stock prices. Aerospace, industrials, and materials stocks trade at meaningful discounts to their technology counterparts while offering comparable or superior growth prospects for 2026.

Risks to the Outlook

The optimistic consensus isn't without risks. A sharper-than-expected economic slowdown could derail earnings growth across cyclical sectors. Tariff policy uncertainty remains elevated, with the Supreme Court ruling on President Trump's trade measures today potentially reshaping the landscape. And the Federal Reserve's interest rate path—still the subject of intense debate among officials—could influence corporate borrowing costs and consumer spending.

Still, the fundamental picture entering 2026 is stronger than it's been in years. If all 16 sectors deliver positive growth, it would signal a corporate earnings environment that's both healthier and more sustainable than the tech-dominated gains of 2024-2025.