By Chris Combs, Silicon Valley Capital Partners
The third quarter of 2025 delivered a mixed but clarifying message for U.S. large-cap equities: the era of effortless mega-cap outperformance has temporarily eased, while the broader corporate landscape has quietly strengthened. With all seven companies in the so-called “Magnificent 7” now having reported, investors finally have a complete picture of how the dominant engines of S&P 500 earnings behaved during the quarter—and what that means for 2026.
A Quarter That Looked Strong—Until It Was Put in Context
At first glance, the Magnificent 7 posted what appears to be a respectable quarter: the group collectively delivered 18.4% year-over-year earnings growth. In nearly any market period, that number would be celebrated. However, relative to the blistering 28.8% average growth these seven companies produced over the prior four quarters, Q3 shows noticeable deceleration.
Part of the slowdown wasn’t economic at all—it was accounting. Meta Platforms reported a GAAP EPS of $1.05, dragged down by a one-time, non-cash tax charge of $15.93 billion, which overwhelmed what would have otherwise been a normal operating result. If Meta is removed from the mix, the remaining six mega-caps would have reported 30.4% earnings growth, nearly in line with their recent trend and solidly ahead of the index.
Despite this distortion, the group’s performance versus expectations was underwhelming. Five of the seven companies beat EPS estimates, yet the aggregate surprise was only 2.6%, well below the 6.6% surprise rate delivered by the broader S&P 500. This marks the weakest mega-cap earnings-growth result since Q1 2023, when the cohort increased profits by only 5.6%.
The Rest of the S&P 500 Quietly Delivered Its Best Showing in Years
The more striking development sits outside the Magnificent 7. The other 493 companies in the S&P 500 recorded 11.9% earnings growth, marking only the second time in the past three years that the rest of the index produced double-digit profit expansion. In effect, the 2025 earnings season highlighted a rare moment: mega-caps slowed, while the “regular economy” strengthened.
Several individual companies played meaningful roles in lifting index-wide results. NVIDIA, Alphabet, Amazon, and Microsoft remained among the top contributors to S&P 500 earnings growth. But outside the tech complex, Eli Lilly and Intel emerged as major contributors thanks to easier comparisons versus 2024 results, which had been weighed down by charges. Uber, meanwhile, posted a large GAAP profit due to a $4.9 billion tax valuation benefit, adding another one-time distortion to index-level optics.
Analysts Expect Mega-Caps to Reaccelerate Through 2026
Looking forward, Wall Street anticipates that Q3’s slowdown for the Magnificent 7 will prove temporary. Consensus estimates call for a reacceleration beginning in the fourth quarter of 2025 and extending through next year. Analysts forecast earnings growth of:
• 19.8% in Q4 2025
• 18.5% in Q1 2026
• 22.1% in Q2 2026
• 24.5% in Q3 2026
If realized, mega-cap earnings growth would once again outpace the broader market and re-establish the pattern that has characterized the index for most of the past five years.
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Three Conclusions for Investors Heading Into 2026
1. Mega-Cap Growth Has Paused—Not Peaked
The Q3 slowdown was largely driven by isolated, non-recurring charges rather than core demand or margin erosion. Analyst forecasts for 2026 suggest the Magnificent 7 will return to above-trend growth, powered by cloud-AI demand, advertising normalization, compute-infrastructure spending, and efficiency gains.
2. The Broader U.S. Corporate Sector Is Re-Accelerating
The most overlooked development this quarter was the resurgence among the other 493 S&P companies. With double-digit growth and cleaner year-over-year comparisons ahead, 2026 earnings season could show the broadest earnings participation since the pre-pandemic cycle.
3. Earnings Season 2026 Will Likely Be Defined by Narrow Leadership—but With Wider Support
Mega-caps should continue to lead total earnings growth into 2026, but the market may become less dependent on them than it has been since 2020. If current trends hold—AI-driven investments at the top, but improving margins across industrials, healthcare, and services—2026 may become the first year where the S&P 500 shows both strong overall earnings growth and balanced sector contributions.