US earnings preview Q3 2026: rapid growth, tech, bond yields

Investors believe that earnings growth can outweigh the drag from higher interest rates, but opinion remains divided. City writer Graeme Evans looks at the real growth drivers.

6th October 2026 13:23

by Graeme Evans from interactive investor

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AI-fuelled Wall Street records are facing a major test in the coming weeks as America’s biggest companies prepare to reveal how they are faring in the face of higher bond yields.

PepsiCo Inc (NASDAQ:PEP) gets the earnings season under way prior to Thursday’s opening bell before Delta Air Lines Inc (NYSE:DAL) on Friday and a host of banks including JPMorgan Chase & Co (NYSE:JPM) next Tuesday. The peak is usually the final week of October, when Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) should be among the reporters.

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Another strong performance is expected as financial data firm FactSet said on Friday that the S&P 500 index is set to post earnings growth of more than 25% for a third straight quarter.

It added that a record 72 companies have issued positive earnings guidance for the third quarter, driven by the information technology sector with 44.

This reliance on the AI build-out was also seen after the second-quarter results season as earnings grew by more than 50% year-on-year, or by a forecast-beating 32% when excluding one-off gains by Google owner Alphabet Inc Class A (NASDAQ:GOOGL) and Amazon.

Bank of America Corp (NYSE:BAC) responded in September by raising its earnings per share forecast for this year by 6% to $365, representing growth of 33% on a year earlier. It expects 2027 to decelerate but still come in above trend through a rise of 12% to $410.

However, the bank flagged the risk of “more earnings eggs in one AI basket” after noting that just five stocks - NVIDIA Corp (NASDAQ:NVDA), Alphabet, Micron Technology Inc (NASDAQ:MU), Microsoft Corp (NASDAQ:MSFT) and Apple - accounted for a record 27% of next 12-month S&P 500 earnings.

The bank said that semiconductor stocks alone were likely to contribute over 60% of the total consensus earnings per share growth in 2027.

The tech momentum last night drove the Nasdaq Composite and Magnificent Seven of mega-cap companies to all-time highs, with the S&P 500 index just half a per cent short of a milestone.

These landmarks have been set against the backdrop of September’s first Federal Reserve interest rate hike since 2023 and a global bond market sell-off that yesterday resulted in a fresh 24-year high for the 10-year US Treasury yield.

If investors can earn more than 5% from US government debt, stocks need to offer a more compelling return to justify the additional risk. Companies refinancing debt, households taking mortgages and businesses funding new investment all face a higher cost of money.

While the headline performance of the S&P 500 continues to appear resilient, Saxo Bank said this masked much weaker trends beneath the surface.

It pointed out that only two S&P 500 sectors registered growth in the past month - technology with a rise of 7.1% and communication services at 3.3%.

Every other sector fell over the same period up to last week, with materials, utilities and real estate all down by 6% or more.

Banks are often thought of as beneficiaries of higher rates but worries about credit conditions, weaker loan demand and funding costs meant that financials fell 7%.

Historically, technology and other growth stocks are among the biggest losers when bond yields rise as higher discount rates make future earnings worth less today.

Saxo said: “For now, investors believe that earnings growth from AI infrastructure, chips, cloud computing and related investment can outweigh the drag from higher interest rates.

“The strongest technology companies also have something that highly leveraged companies do not: large cash flows and strong balance sheets. They are much less dependent on refinancing markets to fund growth. That means today’s market divide is not simply growth versus value.

“It is increasingly becoming companies that can fund their own growth versus companies dependent on expensive capital.”

UBS Global Wealth Management expects yields to ultimately stabilise, but that investor caution may persist until there is more confidence that inflation will decline at a steady pace. This means elevated yields may continue to pressure stock valuations.

In addition to headwinds from higher yields, it said that the fact that US equities are close to all-time highs may deter some investors.

However, it told clients this morning: “We have highlighted that all-time highs are not a rare occurrence historically, and valuations have a poor record as short-term timing tools.

“Our analysis shows that earnings and a supportive growth backdrop matter more, and the current environment remains favourable for profit growth.”

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