Aggregate earnings growth stands at 27.7% y-o-y, compared to the 13.1% estimated at the end of March, marking the strongest performance since late 2021. Net margins have also reached 14.7%, a record since FactSet began tracking data in 2009, demonstrating that the upside surprise stems not only from sales but also from highly favorable operating leverage.

However, these impressive statistics are primarily driven by artificial intelligence (AI) related segments. According to WisdomTree data as of May 8, the technology sector, which represents 37% of the index, has already posted 23.9% revenue growth and a 44.2% surge in earnings. Communication services, bolstered by digital platforms, saw earnings rise by 49%, while consumer discretionary gained 47.3%, particularly supported by Amazon.

Despite the geopolitical backdrop, analysts have significantly raised their S&P 500 EPS forecasts. The consensus now projects $332.06 over the next twelve months, up 11.9% YTD and 25.8% y-o-y, bringing the index valuation to 21.7x forward earnings. The market has therefore already priced in a significant portion of this improvement, making continued revisions as crucial as the reported results themselves.

The primary point of concern remains the narrow breadth of the movement; Citadel Securities notes that only 22% of stocks have outperformed the S&P 500 over the past thirty days, a 30-year low. An improvement in the geopolitical situation around the Strait of Hormuz could encourage a broadening of the rally toward cyclical and domestic stocks. Nevertheless, Nvidia's results on May 20, followed by Broadcom's in early June, will remain the most critical test to determine if the AI cycle continues to justify the current market premium.