Beyond Mega-Caps: A Broader Earnings Story

The report examines whether the S&P 500’s earnings growth is gradually broadening beyond the Magnificent 7. After the Mag 7 reached peak concentration in 2024, the report finds that Ex-Mag 7 companies are expected to contribute ~69% of incremental S&P 500 net income in 2026, rising to ~85% in 2027, supported by a recovery across sectors and the growing impact of AI-driven productivity. At the same time, the Mag 7 valuation premium has narrowed sharply, while broader-market multiples have remained relatively stable. The report also highlights the key risks that could shape the pace of this earnings broadening, including AI capex and depreciation, higher interest rates, geopolitical disruption, and the quality of reported earnings.