U.S. earnings season is about to kick off, and Wall Street has already laid out its expectations: S&P 500 Q3 earnings are projected to rise 27%, with AI infrastructure accounting for more than half of the growth.

A preview of earnings season from Goldman Sachs’ Ben Snider team, dated October 2 (as reported by TheStreet / Seeking Alpha):

1️⃣ Consensus expects S&P 500 Q3 EPS to rise 27% year over year, compared with actual growth of about 33% in Q2. Growth is slowing, but it’s still strong compared with the 5-year average of 13.3%, according to FactSet. Goldman’s view: Most companies will beat expectations.

2️⃣ Companies benefiting from AI infrastructure are expected to account for more than half of earnings growth; the Information Technology and Energy sectors together are expected to contribute nearly 80%.

3️⃣ Cloud providers’ capex is expected to rise 116% year over year (Q2 was 87%). Goldman Sachs expects combined cloud revenue growth at Amazon, Google, Microsoft, and Oracle to increase from 48% to 55%.

4️⃣ A note of caution: The top 10 companies are expected to account for 68% of growth. The median company’s earnings growth is just 9%, and its median net profit margin is 14.7%, down from 15.1%.

FactSet’s data from the same day was a bit more optimistic:

· Expected Q3 earnings growth is 29.5%, up from 26.7% at the start of the quarter. Analysts have raised their estimates during the quarter, whereas over the past five years, estimates have been lowered by an average of 2.2% during the quarter.

· 116 companies issued Q3 guidance; 72 were positive, or 62%. The five-year average is just 40%.

· The forward 12-month P/E ratio is 19.0, below the five-year average of 19.8.

My take:

Heavy capex spending isn’t the problem; the question is whether it generates revenue. If cloud revenue growth really climbs from 48% to 55%, that suggests the money isn’t being spent to fuel a bubble—it’s being spent to expand capacity for incoming orders.

High concentration? Yes. But for decades, a handful of companies have been pulling the entire U.S. stock market index forward. That’s not a bug; it’s the default setting of modern capitalism.

I still haven’t found the right season to short the S&P 500 in 2026 😂

During earnings season, I’ll be keeping a close eye on three things: cloud revenue, capex guidance, and whether profit margins at the median company can stop falling.

Sources: Goldman Sachs’ 10/2 pre-earnings-season outlook (via TheStreet / Seeking Alpha), FactSet Earnings Insight, 10/2.

Not investment advice.