Societe Generale told institutional clients in a note on Tuesday that U.S. corporate earnings momentum is extending well beyond technology companies and that the S&P 500 could reach 8,000. The firm advised investors to "buy the momentum dip," arguing that recent results and guidance point to widening fundamental strength.
Manish Kabra, Societe Generale's Chief U.S. Equity Strategist, described what he called "another stellar earnings season." He noted that, with roughly 6 of 10 firms having reported, just 9% have missed estimates - a figure he labeled "the lowest reading ever." The bank highlighted an abundance of upside surprises and improving profitability across most sectors.
According to the note, 86% of reporting companies have topped expectations, while margins have improved in 10 of 11 sectors. Those developments have pushed margins for both the S&P 500 overall and the S&P 500 ex-technology index to record highs, the firm said.
SocGen observed that companies beating estimates have continued to be rewarded in the market despite a mid-season momentum rotation, outperforming the broad index by roughly 0.2%, while names that missed have underperformed. Upgrade activity remains robust by the firm's measure - about 15 upgrades for every 10 downgrades - with technology, financials and industrials leading the lift.
The bank has increased its 2026 earnings-per-share estimate by 2% since the start of the season, taking the figure to $335. On artificial intelligence-related activity, SocGen pointed to accelerating "hard data": cloud revenue for the three largest hyperscalers is picking up, reported backlogs have risen by $300 billion and capex guidance has increased by $150 billion, the note said.
Industrial companies drew particular mention for hitting record margins and registering rising upgrades. SocGen also highlighted divergent growth dynamics across market capitalizations - large-cap EPS growth of about 15% versus small-cap growth near 30% - and said the S&P 500 Equal Weight Index reaching record highs is evidence that earnings strength is broadening.
While the firm acknowledged elevated market leverage and the possibility that higher real yields could cap valuation re-rating, it argued that a decisive market reversal would require aggressive monetary tightening and a yield-curve inversion. SocGen does not view that as the base-case scenario. Given its read of fundamentals and leadership across sectors, the firm expressed a preference for the equal-weight index and reiterated its 8,000 target for the S&P 500.
Clear summary
- Societe Generale expects the S&P 500 to reach 8,000 as earnings gains spread beyond technology.
- The bank recommends investors "buy the momentum dip" amid broad beats, margin expansion across most sectors and continued upgrades.
Key points
- Earnings season shows unusually strong results so far - 86% of companies beating estimates and just 9% missing among those reported.
- Margins have improved in 10 of 11 sectors, lifting both S&P 500 and S&P 500 ex-tech margins to record highs; upgrades favor tech, financials and industrials.
- AI-related indicators cited include faster cloud growth among major hyperscalers, $300 billion in rising backlogs and $150 billion higher capex guidance.
Risks and uncertainties
- Market leverage is elevated - higher leverage could amplify volatility across equities, particularly in highly geared sectors.
- Higher real yields could cap valuation re-rating, potentially restraining further multiple expansion for the market as a whole.
- A reversal in sentiment would likely require aggressive monetary tightening and a yield-curve inversion - outcomes SocGen does not currently expect but which would materially alter the outlook.