Earnings beats fail to fire up S&P 500 index

Judging by Wall Street’s response to results so far, Meta Platforms and Tesla are facing a tough test when they present their figures later this week.

20th October 2026 15:21

by Graeme Evans from interactive investor

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Traders on the floor of the New York Stock Exchange. Photo: Michael M. Santiago/Getty Images.

A negative reaction to forecast-beating results by General Motors Co (NYSE:GM) today highlighted Wall Street’s “unusually high bar” as the US third-quarter earnings season steps up a gear.

The shares of Detroit-based GM opened more than 6% lower after the company’s $15 billion (£11.2 billion) mid-point on tightened full earnings guidance missed hopes of about $15.4 billion.

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The slide in valuation came even though third-quarter earnings growth of 21.6% to $4.1 billion beat hopes and the car maker also disclosed a new share buyback plan worth $20 billion.

It was a similar story for GE Aerospace (NYSE:GE), which fell more than 4% in New York despite raising its full-year guidance on the back of a much stronger third quarter.

The aircraft engine supplier said orders rose 49% to $19 billion, with the commercial engines and services segment up 58% to $15.3 billion. GE Aerospace now sees 2026 adjusted revenue growth of 19%-20%, compared with its previous guidance for the high teens.

It also increased its full-year operating profit outlook to as much as $11billion, up from $10.55 billion-$10.75 billion.

The earnings season faces even bigger tests in the next two days, with figures from Space Exploration Technologies Corp Class A (NASDAQ:SPCX) and Netflix Inc (NASDAQ:NFLX) due after tonight’s closing bell and Tesla Inc (NASDAQ:TSLA) and Meta Platforms Inc Class A (NASDAQ:META) on Wednesday night.

Companies accounting for about 17% of the S&P 500 index by earnings had reported by the end of last week, with 80% of this 46-strong group ahead of Wall Street expectations.

That’s 10 percentage points better than the average but is down from 88% at the same stage of the previous quarter.

While the sample size is small, Bank of America said companies that beat both earnings per share and revenue expectations outperformed by less than usual the next day.

It added: “Reactions in either direction have been muted, with the average stock moving 3.4% the day after reporting versus 5.3% last quarter.

“While we expect solid results, companies’ ability to provide reassurance on the outlook amid macro headwinds will likely be a bigger driver of performance this quarter.”

The jitters were reflected in the last week’s performance of the S&P 500 index, which fell 2% as concerns about financing the AI buildout weighed on technology shares.

FactSet currently expects S&P 500 earnings to rise 29% year-on-year, which if achieved would mark the third successive quarter of more than 25%.

Analysts raised Q3 earnings estimates by 1.4% during the quarter, whereas over the previous five years estimates have typically been cut by around 2.2%.

Saxo Bank said this meant an unusually high bar and a situation where strong results may not be enough if valuations already assume exceptional growth.

It said: “The headline earnings numbers may still be very strong. But with expectations elevated, valuations demanding and Treasury yields near multi-decade highs, the investment hurdle has become higher as well.

“This season should therefore be less about simply identifying who beat consensus by the largest amount.

“The stronger businesses may be those that can deliver growth above expectations, convert that growth into cash, fund future investment from a strong balance sheet and still offer enough earnings upside to justify their valuation.

“In other words, investors may increasingly reward profitable, self-funded growth at a defensible valuation rather than growth at any price. That could also mean greater dispersion between companies and index constituents.”

In particular, investors will be watching for signs that accelerating cloud revenue growth at hyperscalers is supporting continued investment in the data centres and computing infrastructure needed to power the growing use of AI.

Semiconductor firm Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) last week raised its full-year revenue growth outlook to 44%, while ASML Holding NV (EURONEXT:ASML) said it expected demand to continue to outstrip supply throughout at least 2028.

UBS Global Wealth Management told clients this morning: “Without taking a view on individual companies, we think these results provide further evidence that AI demand remains strong and continues to grow.

“We also expect incoming results from hyperscalers to show accelerating cloud revenue growth.”

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