Investing.com — The S&P 500‘s earnings growth in the third quarter was largely supported by Big Tech, according to a recent note from Barclays (LON:BARC) analysts.
Without the contribution of six major tech companies, the broader index’s performance would have fallen below long-term medians across multiple metrics, they said.
Big Tech’s resurgence was a standout feature of the quarter, with double-digit EPS surprises from the sector, said the bank.
They explained that the uplift ensured that headline earnings season statistics for the SPX remained robust.
However, Barclays noted that without these contributions, the rest of the SPX would have shown year-over-year EPS growth below its long-term median, flat net margins, and negative operating leverage, with EPS growth lagging behind sales growth.
The quarter’s overall EPS surprise of 7.1% marked a sequential improvement and was nearly 200 basis points above the long-term trend.
Even so, this was partly due to outsized negative revisions ahead of earnings season, which Barclays estimated added around 120 basis points to the surprise figure.
Barclays added that while 77% of companies beat consensus estimates—a figure close to historical averages—it also marked the lowest breadth of EPS beats since 2022.
Looking ahead, Barclays sees the consensus forecast of 13% EPS growth in 2025 as overly optimistic. The bank expects further downward revisions, as non-Tech segments of the SPX grapple with disinflation and slowing macroeconomic conditions.
“SPX ex-Tech [is] contending with disinflation and slower macro,” Barclays noted.
Barclays highlighted that earnings growth in the coming quarters will likely favor Big Tech and Healthcare, two sectors that are currently trading at smaller-than-average premiums to their 10-year median P/E ratios.