By Christopher Combs, Chief Investment Officer, Silicon Valley Capital Partners
March 2, 2026
Executive Summary
For the first time since Q2 2025, analysts reduced S&P 500 first-quarter earnings estimates during the opening two months of a quarter. The headline sounds concerning. The reality is not.
The 1.5% decline in Q1 EPS estimates is modest by historical standards and smaller than most long-term averages. More importantly, earnings expectations for the remaining three quarters of 2026 have been revised higher.
And within the sector breakdown, one conclusion stands out clearly: Information Technology is the brightest shining star in the earnings landscape. While several cyclical sectors have seen downward revisions, Technology estimates have moved higher — both for Q1 and for full-year 2026 — reinforcing its role as the structural earnings leader of this cycle.
The trim is real. The broader trajectory remains constructive.
1. A Modest Reset — Smaller Than Historical Norms
According to FactSet bottom-up data, first-quarter 2026 EPS estimates declined 1.5%, from $71.57 at year-end to $70.50 by February 26 (FactSet, 2026). Bloomberg consensus revisions reflect a similar recalibration (Bloomberg Intelligence, 2026).
Historically, analysts reduce earnings estimates during the first two months of a quarter as companies guide conservatively. The average early-quarter reduction has been:
- 1.2% over the past five years
- 2.4% over the past ten years
- 2.6% over the past fifteen years
- 3.2% over the past twenty years
In that context, this quarter’s 1.5% adjustment is not extreme. It is below longer-term historical averages.
Markets react to deviation from trend, not the existence of trend. And this adjustment falls within historical norms.
2. Sector Divergence — Technology Leads While Cyclicals Reset
Eight of eleven sectors experienced Q1 estimate reductions, led by:
- Health Care (−13.2%)
- Energy (−12.3%)
However, two sectors saw upward revisions — most notably Information Technology (+5.2%), the strongest positive revision of any sector (FactSet, 2026).
Bloomberg data confirm that mega-cap technology earnings expectations for 2026 continue to grind higher even as commodity-sensitive and rate-sensitive sectors adjust lower (Bloomberg Intelligence, 2026).
This divergence is critical.
Technology is not merely avoiding downward revisions; it is absorbing incremental upward revisions during a quarter when the broader index is being trimmed. That signals earnings durability, AI-driven margin expansion, and revenue resilience.
The dispersion narrative is widening:
Cyclicals are normalizing. Secular growth is accelerating.
3. Full-Year 2026 Estimates Are Moving Higher
While Q1 was trimmed, analysts increased estimates for:
- Q2 2026: +0.7%
- Q3 2026: +1.2%
- Q4 2026: +2.2%
As a result, full-year 2026 EPS rose 0.8%, from $311.25 to $313.62 (FactSet, 2026).
Six sectors posted upward revisions for calendar 2026, led again by:
- Information Technology (+4.1%)
- Materials (+2.9%)
Five sectors declined, led by:
- Energy (−6.5%)
- Health Care (−2.3%)
The directional signal is clear: confidence in the back half of 2026 is improving.
Equity markets discount future earnings, not current quarter noise. If forward estimates are rising, valuation support strengthens — particularly for long-duration growth companies.
Final Thoughts
The first trim since Q2 2025 is notable. But it is modest in magnitude, historically consistent, and concentrated in cyclical industries.
Meanwhile, Technology — powered by AI monetization, infrastructure build-outs, and productivity leverage — continues to see upward estimate revisions and stands as the clearest earnings leader in the index.
This is not the beginning of earnings deterioration. It is a rotation within earnings leadership.
The future still looks very bright.
References
Bloomberg Intelligence (2026) S&P 500 Earnings Consensus and Forward Estimates. Bloomberg Terminal data, accessed March 2, 2026.
FactSet (2026) Earnings Insight: Q1 2026 Aggregate EPS Trends. FactSet Research Systems, February 28, 2026.