The S&P 500 posted five successive record closes last week, bringing the index’s total rally to 28% since its April 8 low. This sharp rebound marks the second-fastest recovery from a 19%+ drawdown in the last 75 years, according to Creative Planning’s chief strategist, Charlie Bilello, as quoted on Yahoo Finance. The trajectory formed a textbook V-shape in the 2025 chart for the benchmark index.
While some investors remain uncertain about what’s fueling the market’s sharp ascent, the synchronized V-shaped recovery in earnings expectations offers a compelling explanation. Data from Morgan Stanley’s chief investment officer Mike Wilson revealed that earnings revisions breadth — the ratio of companies raising their forecasts versus those lowering them — has jumped in line with the rise in the S&P 500, as quoted on the above-mentioned Yahoo Finance article.
In a nutshell, a positive picture is emerging from the Q2 earnings season, with an above-average proportion of companies beating consensus estimates. The combination of a stabilizing macroeconomic backdrop and reassuring management commentary is helping to reverse the earlier negative revisions trend, with estimates for the second half of the year starting to increase again.
Initially rattled by fears over President Trump’s “Liberation Day” tariffs, analysts slashed earnings estimates earlier this year. However, those projections have since rebounded sharply. For the 117 S&P 500 companies that have already reported Q2 results, total earnings are up 8.3% from the same period last year on 5.3% higher revenues, with 87.2% beating EPS estimates and 80.3% beating revenue estimates, per the Earnings Trends issued on July 23, 2025.
The proportion of these 117 index members beating EPS and revenue estimates is tracking notably above the historical average for this group of companies. The Q2 EPS beats percentage of 87.2% for this group of index members compares to the 20-quarter average of 81.9% while the same on the revenues side is 80.3% vs. 70%, as per the Earnings Trends.
Since the start of July, Q3 estimates have increased for half of the 16 Zacks sectors, including Finance, Tech, Consumer Discretionary, and even Autos and Energy. Expectations for earnings growth in the latter half of 2025 and into 2026 continue to rise. As of July 25, analysts project 2026 earnings to grow by 13.9%, a modest yet meaningful increase from the 13.8% forecast a month ago.