• S&P 500 revenues grew 6.4% year over year in Q2 excluding energy, the fastest pace in five years, with Big Tech leading the charge.
  • Corporate earnings jumped nearly 50% year over year, partly driven by tech firms marking up private investments, while tariff refunds exceeding $100 billion provided a windfall for companies.
  • Analysts see continued tech-led strength, but sustainability hinges on tech dominance, macro policy, and consumer demand.

Tech-Driven Surge

S&P 500 companies posted their strongest revenue growth in half a decade during the second quarter, according to Goldman Sachs research. Revenues excluding energy surged 6.4% year over year, the fastest clip since 2019. The acceleration was largely powered by Big Tech, which saw robust demand for AI-related services and cloud computing. Excluding the tech sector, median S&P 500 revenue growth was a more modest 3%, underscoring a widening divide between tech and the rest of the market.

"The revenue story in Q2 was clearly a tale of two markets," said a senior strategist at a major investment bank, speaking on condition of anonymity. "While big tech continues to outperform, the broader market is seeing more tepid growth."

Earnings Boost and Tariff Windfall

Corporate earnings for the S&P 500 jumped approximately 50% year over year, a figure that flatters the underlying trend. Part of the surge stems from tech companies marking up the value of their private investments, a non-cash gain that nonetheless boosted reported profits. Excluding these one-time gains, earnings growth was still robust but more modest.

Meanwhile, companies received over $100 billion in tariff refunds from the government, providing a cash infusion that many used for marketing campaigns, cost relief, and lowering prices for customers. "These refunds were a pleasant surprise," said a CFO at a mid-cap manufacturer. "We've been able to invest in new product lines without raising prices."

Implications for Markets

Goldman Sachs analysts have highlighted the AI-driven earnings upside and the potential for record profit margins, particularly among mega-cap tech firms. "The market is rewarding companies that can leverage AI to boost productivity and revenue," said the strategist. "But there's a risk if this tech dominance fades."

The divergence between tech and non-tech revenue growth could have implications for the broader market. While the S&P 500 index is heavily weighted toward tech, the median stock's performance may lag if the sector cools. "Investors should be selective," advised another analyst. "The earnings backdrop is solid, but it's not uniform."

Looking Ahead

Short-term outlook suggests continued strength from Big Tech and AI investments, but sustainability depends on several factors: whether tech companies can maintain their growth trajectory, macro policy shifts, and any changes in consumer demand. Tariff refunds may not continue indefinitely, and inflation moderation could impact pricing power.

As we move into the second half of the year, market watchers will be closely monitoring earnings calls for guidance on AI spending and revenue momentum. "The next few quarters will be critical," the strategist noted. "We're seeing a narrow market, and that could be a vulnerability."

Correction: An earlier version of this article misstated the revenue growth figure as 6.5%. The correct figure is 6.4%. We regret the error.