U.S. stocks posted strong results during the second-quarter earnings season. As of July 31, 64% of S&P 500 components that had reported earnings exceeded consensus market expectations for earnings per share (EPS) by at least one standard deviation—one of the highest levels on record.Excluding “other income” from equity investments by tech giants, the S&P 500’s second-quarter EPS growth reached 26% year-over-year, the fastest pace since 2021; when including this income, the overall growth rate soared to 45%, far exceeding the market’s previous expectation of 22%.

Meanwhile, hyperscale cloud computing providers such as Alphabet, Amazon, and Microsoft reported combined capital expenditures (capex) of $182 billion for the second quarter. Revenue from their cloud businesses grew 48% year-over-year, a significant acceleration from the 39% growth recorded in the first quarter, indicating that returns on AI investments are materializing at an accelerating pace.Analysts predict that capital expenditures by hyperscale cloud computing providers will exceed $1 trillion by 2027—an upward revision of more than $125 billion from pre-earnings season forecasts—as investment in AI infrastructure continues to expand.Although earnings exceeded expectations, the market’s reaction to the technology, media, and telecommunications (TMT) sector was relatively subdued. However, AI infrastructure-related stocks contributed approximately one-third of the S&P 500’s earnings per share (EPS) growth in the second quarter and are expected to rise further to over 50% in the second half of 2026 and throughout 2027.