3Q Reporting Season Overview
The current reporting season is marked by strong earnings and a surge in AI capital expenditures, despite rising risks and high valuations.
Key observations from the season include:
- Valuations are stretched, particularly at the top end of the market.
- The AI investment cycle remains in full swing.
- Earnings have been surprisingly resilient, with 2025 numbers holding up and 2026 estimates ticking higher.
- Q3 estimates are being revised upwards, and Q4 estimates are holding firm.
Financials have been the largest positive contributor to growth, driven by booming trading, capital markets, and decent wealth and insurance results. However, energy, communication services (excluding mega caps), and healthcare have been detractors.
When forward profits rise, markets tend to increase.
As Jamie Dimon warned,
where there is one cockroach, there are often more, indicating potential underlying issues despite the overall strong earnings.
Author's summary: Earnings remain strong despite rising risks.
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