• Deutsche Bank raised its 2026 S&P 500 EPS forecast to $358 from $342, and its 2027 forecast to $420 from $390.
  • The revision follows a strong Q2 earnings season, with 87% of companies beating estimates and profits on track to grow 33%.
  • The bank cites record margins and broadening earnings strength beyond Big Tech as key drivers.

Deutsche Bank has become the latest major financial institution to upgrade its outlook for U.S. corporate profits, lifting its S&P 500 earnings per share (EPS) forecasts for 2026 and 2027. The revision, announced Thursday, reflects a robust Q2 earnings season that has exceeded expectations across a wide swath of industries.

The bank now sees S&P 500 EPS reaching $358 in 2026, up from its prior estimate of $342, and $420 in 2027, up from $390. The move comes after a remarkable earnings period in which roughly 87% of S&P 500 companies beat analyst estimates, with second-quarter profits on track to surge about 33% year-over-year.

Broadening Earnings Momentum

Deutsche Bank's analysts emphasized that the earnings strength is no longer confined to the technology megacaps that have driven market gains in recent years. Instead, the bank noted that profit growth is broadening across sectors, supported by record-high margins and robust sales growth.

"The earnings recovery is becoming more inclusive," said a Deutsche Bank strategist in a note to clients. "While AI-related demand continues to be a tailwind, we're also seeing strength in industrials, financials, and consumer discretionary, which points to a more sustainable expansion."

This broadening is a key reason why the bank felt confident in raising its forecasts despite lingering concerns about inflation and interest rates. The record margins, driven partly by productivity gains and cost discipline, have allowed companies to maintain profitability even as input costs remain elevated.

Implications for Investors

The upward revision adds to a growing chorus of bullish calls from Wall Street banks, which have been adjusting their earnings models higher as the Q2 results pour in. For investors, the higher EPS forecasts imply that the equity market's valuation, while elevated, is supported by improving fundamentals.

"This is a positive signal for the broader market," said a portfolio manager at a large asset management firm. "When earnings beat expectations across the board, it suggests that corporate America is in better shape than many feared, which could justify current valuations."

However, some analysts caution that the high beat rate may partly reflect lowered expectations entering the quarter. The strong dollar and geopolitical uncertainties remain potential headwinds, and the sustainability of record margins is uncertain as wage pressures persist.

Looking Ahead

Deutsche Bank's revised forecasts now align more closely with those of other major brokers, which have also lifted their S&P 500 EPS targets for 2026 and 2027. The consensus view is that earnings growth will remain robust, albeit at a moderating pace compared to the explosive growth seen in the recovery from the pandemic.

As the third quarter progresses, investors will watch whether the earnings momentum persists. Upcoming data on consumer spending, manufacturing, and employment will be crucial in determining whether the U.S. economy can continue to support double-digit profit growth.

For now, Deutsche Bank's move reinforces the narrative that corporate America is thriving, with profits expanding beyond the tech sector. For equity investors, that's a reassuring sign that the bull market may have further to run, even as risks remain on the horizon.