The S&P 500 posted its strongest quarterly earnings growth in nearly three years during the first quarter, with overall profits rising 27-28% year-over-year. That's the highest mark since the final quarter of 2021, according to the latest aggregate data from the index's constituents.
Why the Magnificent Seven Mattered
The group of seven mega-cap tech stocks — often called the Magnificent Seven — drove a good chunk of that gain. Their combined earnings per share jumped 63.2% in the first quarter compared to the same period a year earlier. That kind of growth is hard to ignore, especially when you consider how much weight those stocks carry in the index.
But it wasn't just the big names. The rest of the S&P 500 — the roughly 493 other companies — posted 17.4% earnings growth. That's their best performance in five years. So while the tech giants are still pulling the heaviest load, the rally is broadening.
A Signal for the Broader Market
The 17.4% figure from the non-Magnificent Seven stocks is notable because it suggests profit gains are spreading beyond the usual suspects. For the past couple of years, much of the earnings growth had been concentrated in a handful of tech firms. Now companies across sectors are chipping in more.
That could be a healthy sign for the market's durability. When earnings growth is broad-based, the index is less vulnerable to a stumble by any one sector. And the overall 27-28% number shows the economy's corporate side is still firing on most cylinders, even as some investors worry about slowing consumer spending or sticky inflation.
What Comes Next
The big question now is whether the rest of the index can keep up its pace. The Magnificent Seven will face tougher year-over-year comparisons later this year, meaning their growth rate will likely slow. If the other 493 companies can maintain or improve their 17.4% clip, the S&P 500 could deliver another solid quarter.
Second-quarter reporting season starts in a few weeks. That will be the first real test of whether the broadening trend has legs — or if the first quarter was a one-off.
