U.S. equity earnings revisions have turned positive for a fifth straight quarter across large, mid and small caps, according to Raymond James, with broad-based gains expected to extend into 2026 and 2027.
The S&P 500’s earnings per share are projected to climb more than 25% next year, supported by a 1% uplift from tariff refunds and write-ups of private investments. Small and mid-cap stocks are forecast to post year-over-year EPS growth of 14% to 20% in 2026, the firm said.
Earnings revisions have improved in 10 of 11 S&P sectors, with Materials the sole exception, showing worse-than-typical EPS adjustments across all three market capitalizations. Cyclical sectors such as Energy, Materials, Technology and Financials are expected to see growth peak in the second quarter of 2026 before moderating in 2027. Industrials and Consumer Discretionary are projected to continue accelerating.
Defensive sectors are forecast to see year-over-year EPS improvements over the next six quarters, while large and mid-cap equities trade at historically elevated price-to-earnings multiples. Small caps, by contrast, remain in line with historical averages.
Raymond James flagged hyperscaler free cash flow as a key downside risk, with estimates for 2026 at negative $45 billion—down from roughly $250 billion two years ago—and projected to worsen to negative $130 billion in 2027.
