• S&P 500 firms post strong Q1 earnings with real revenues up 6.3% excluding energy, signaling resilience despite geopolitical tensions.
  • Margins face pressure from higher oil and input costs, but AI-driven investment remains a key growth engine.
  • Hyperscalers boost 2026 capex plans to over $750 billion, underpinning sustained corporate investment.

Q1 Earnings Show Strength

Goldman Sachs highlighted robust Q1 earnings across S&P 500 companies, with real revenues climbing 6.3% excluding energy. According to the bank's analysts, firms showed little sign of slowing spending despite ongoing geopolitical uncertainties, pointing to underlying economic resilience.

“Companies are investing aggressively in AI and other technologies, which is driving capital expenditure,” said a Goldman strategist. “At the same time, higher oil prices and input costs are beginning to squeeze margins, but overall, the economy remains on solid footing.”

AI Investment Surge

AI-related capital expenditure continues to be a standout driver. Hyperscalers have boosted their 2026 capex plans to over $750 billion, reflecting a sustained push into AI infrastructure. This trend supports not only tech firms but also broader corporate investment, as businesses seek to integrate AI into operations.

However, some analysts caution about the sustainability of such high spending levels. “There’s a risk that returns on these massive investments may take longer to materialize,” a market strategist noted. “But for now, the momentum is clear.”

Margins Under Pressure

Despite the revenue growth, profit margins are facing headwinds. Higher energy costs and rising input prices are weighing on corporate profitability, with some sectors feeling the pinch more acutely. Goldman expects modest consumer spending growth ahead, which could help offset some of these pressures.

“Consumers remain resilient, but we’re watching inflation dynamics closely,” the strategist added. “If cost pressures persist, margins could compress further.”

Outlook

The bank’s overall view is cautiously optimistic. With AI investment driving growth and consumer spending holding up, the US economy appears well-positioned to navigate near-term challenges. Still, risks from geopolitical tensions and input costs remain, and earnings season will be a key test of corporate resilience.