{"id":19783,"date":"2026-07-25T09:31:56","date_gmt":"2026-07-25T15:31:56","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=19783"},"modified":"2026-07-25T09:31:56","modified_gmt":"2026-07-25T15:31:56","slug":"sp-500-earnings-sp-earnings-yield-now-5-a-quick-take-on-googles-earnings-report","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=19783","title":{"rendered":"SP 500 Earnings: SP Earnings Yield now 5%; A Quick Take on Google&#8217;s Earnings Report"},"content":{"rendered":"<p>The SP 500 &#8220;earnings yield&#8221; ended the week at 5.03%, it&#8217;s highest print since the last week of March, &#8217;26. (<a href=\"https:\/\/fundamentalis.com\/?p=19363\">Here&#8217;s the late March &#8217;26 post<\/a>.)<\/p>\n<p>The SP 500 earnings yield is not typically a perfect market-timing indicator, but it worked well at the end of March, &#8217;26, given the SP 500 returns in April &#8211; May, &#8217;26.<\/p>\n<p>This week is likely more about the FOMC meeting on Wednesday, July 29th, and then Microsoft&#8217;s and Amazon&#8217;s earnings on Wednesday, July 29th and Thursday, July 30th, respectively, this coming week.<\/p>\n<p>A quick word to the wise: Remember, &#8220;There is a difference between earnings momentum and earnings distortion&#8221;.<\/p>\n<p><em><strong>SP 500 data:<\/strong><\/em><\/p>\n<ul>\n<li>The SP 500 forward 4-quarter estimate (FFQE) this past week ended the week at $372.91, up from the prior week&#8217;s $371.94.<\/li>\n<li>The PE on the forward estimate is now 19.9x, falling below 20x for the first time since early April &#8217;26.<\/li>\n<li>As mentioned above, the SP 500 earnings yield (SP EY) ended last week at 5.03%.<\/li>\n<li>The 2026 SP 500 EPS estimate has risen to an expected EPS growth for the calendar year of 26%, distorted by Alphabet&#8217;s Anthropic gain in Q2 &#8217;26, and will probably see a bigger bump when Amazon reports their Q2 &#8217;26 and Amazon marks up Anthropic (again) as both companies did in Q1 &#8217;26.<\/li>\n<li>Credit spreads have been relatively stable for some time now, with high-yield and investment-grade average spreads (source: Bespoke) being relatively constant during this equity market rally since the first of May &#8217;26.<\/li>\n<li>The &#8220;upside surprise&#8221; for SP 500 EPS is distorted by the Anthropic write-up(s) so it&#8217;s likely not a great gauge of earnings strength right now.<\/li>\n<li>The &#8220;upside surprise&#8221; for SP 500 revenue is 2.6% as of this week, which is relatively stronger than prior quarters.<\/li>\n<\/ul>\n<p>SP 500 earnings are in a very healthy spot, but beware of the growth rates being bandied about particularly in the financial media. In Q1 &#8217;26, the SP 500 EPS growth ended the quarter with a +29.4% EPS growth rate &#8211; astounding by historical standards &#8211; but roughly 5% &#8211; 6% was the Alphabet and Amazon ( AMZN) Anthropic mark-up AND the Netflix (NFLX) merger termination fee. (There is a blog post quantifying these mark-ups on this blog, I just haven&#8217;t taken the time to find it. Ed Yardeni also published something on the mark-ups as well, a few weeks after the earnings reports were released.)<\/p>\n<p>There may be other companies that have privately-held, Anthropic investments too. The big two this blog has noted are Alphabet and Amazon.<\/p>\n<p><em><strong>Alphabet (GOOGL) earnings summary:<\/strong><\/em><\/p>\n<ul>\n<li>Reported Q2 &#8217;26 EPS of $9.11 included a gain or mark-up of $99 billion or $6.26 in EPS, which actually missed the consensus EPS estimate (non-GAAP or operating EPS) of by $0.04 resulting in Alphabet reporting operating EPS of $2.85 vs the $2.89 consensus estimate. (The $6.26 is sourced from the fine print of page 9 of the Alphabet press release.)<\/li>\n<li>Alphabet Q2 &#8217;26 revenue beat the estimate of $117 billion by 2%, printing $119.8 billion<\/li>\n<li>Operating income was largely inline.<\/li>\n<li>Search was also inline, or a slight miss, depending on which earnings summary you read, which was a little bit of a surprise, with &#8220;everything Alphabet&#8221; now being about the cloud.<\/li>\n<li>Cloud revenue is now 21% of total Alphabet revenue, up from 12% in the June &#8217;24 quarter, with cloud revenue growing 82% y-o-y.<\/li>\n<li>Operating margin at 40% looked to be s slight disappointment not being a solid beat. I think consensus was 39% &#8216;ish ?<\/li>\n<li>&#8217;26 capex guidance was boosted to a mid-point of $200 bl, from the prior guide&#8217;s midpoint of $185 billion.<\/li>\n<li>Free-cash-flow went negative for Alphabet, which was not really a surprise given the trend. Here&#8217;s <a href=\"https:\/\/fundamentalis.com\/?p=19775\">this blog&#8217;s earnings preview for Alphabet<\/a> published last week.)<\/li>\n<\/ul>\n<p>So why did GOOGL trade down 8% this past week ?<\/p>\n<ul>\n<li>Well, the overall technology trade was weaker;<\/li>\n<li>The analysts who did the math on the operating EPS may have seen the Q2 &#8217;26 earnings report as a miss;<\/li>\n<li>Readers shouldn&#8217;t ignore the search business: it&#8217;s still an integral part of Alphabet&#8217;s business and the Q2 &#8217;26 search numbers looked just &#8220;meh&#8221;;<\/li>\n<li>Alphabet&#8217;s free-cash-flow is now negative &#8211; not a great thing.<\/li>\n<li>Capex as a % of cash-flow from ops is now 71% (trailing twelve-month or TTM basis);<\/li>\n<li>One bright spot: forward revenue revisions were VERY strong, while EPS revisions were &#8220;meh&#8221;.<\/li>\n<\/ul>\n<p><em><strong>Quick summary: <\/strong><\/em>SP 500 EPS is going to be distorted by these Anthropic gains, and there will be other mark-ups for Alphabet potentially around Waymo, YouTube and SpaceX. Just be sure and distinguish what&#8217;s operating and what&#8217;s not.<\/p>\n<p>GOOGL&#8217;s 50-week moving average on the weekly chart comes into play right at $300, while GOOGL&#8217;s 200-day moving average was slightly breached on Friday&#8217;s, July 24th trade, albeit just slightly. GOOGL should find some support in here, technically speaking.<\/p>\n<p>July 31st comes this Friday and it will be important how some of these technology names end the month.<\/p>\n<p>This blog still has the exact same position in GOOGL coming into the Q2 &#8217;26 earnings report, and while it&#8217;s a portfolio manager&#8217;s job to worry about everything, the revenue revisions and their remarkable strength is some comfort. Here&#8217;s a quick look at the numbers:<\/p>\n<p>Following the October &#8217;25 Alphabet earnings release, here are the consensus revenue estimates for GOOGL for &#8217;26, &#8217;27 and &#8217;28:<\/p>\n<ul>\n<li><em><strong>2028 estimate:<\/strong><\/em> expected revenue growth of 12%<\/li>\n<li><em><strong>2027 estimate:<\/strong><\/em> expected revenue growth of 12%<\/li>\n<li><em><strong>2026 estimate:<\/strong><\/em> expected revenue growth of 13%<\/li>\n<\/ul>\n<p>After this week Q2 &#8217;26 earnings release, here are the same revenue estimates:<\/p>\n<ul>\n<li><em><strong>2028 estimate:<\/strong><\/em> expected revenue growth of 20%<\/li>\n<li><em><strong>2027 estimate:<\/strong><\/em> expected revenue growth of 22%<\/li>\n<li><em><strong>2026 estimate:<\/strong><\/em> expected revenue growth of 23%<\/li>\n<\/ul>\n<p>This blog will have earnings preview&#8217;s of Amazon (AMZN) and Microsoft (MSFT) this coming week.<\/p>\n<p>In terms of SP 500 earnings data, the fact that the SP 500 earnings yield is above 5% and the PE below 20x is the same formulaic setup as late March &#8217;26, before the monstrous April and May &#8217;26 equity rally.<\/p>\n<p>Much will depend on FOMC commentary. CME fed fund futures are still not expecting a 25 bp hike this coming week, but it does look like the Sept. &#8217;26 meeting does see a 25 bp hike in the FOMC cards. The FOMC standing pat this week, could see a nice month end rally for the stock market. (That&#8217;s not a prediction, just talking out loud.)<\/p>\n<p>None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. All EPS, revenue and estimate data sourced above, is from LSEG. None of this information may be updated, and if updated, may not be done in a timely fashion.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The SP 500 &#8220;earnings yield&#8221; ended the week at 5.03%, it&#8217;s highest print since the last week of March, &#8217;26.&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[163,110,91],"tags":[],"class_list":["post-19783","post","type-post","status-publish","format-standard","hentry","category-fomc-meeting","category-googl","category-weekly-earnings-update"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/19783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=19783"}],"version-history":[{"count":9,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/19783\/revisions"}],"predecessor-version":[{"id":19792,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/19783\/revisions\/19792"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=19783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=19783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=19783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}