Investing.com -- S&P 500 companies are on course for 32% year-on-year EPS growth in the second quarter of 2026, following a 30% jump in Q1. This back-to-back earnings run rivals the strongest on record.

Bank of America strategists led by Savita Subramanian, noted that such streaks of 30%-plus EPS growth have occurred only 10 times since 1936, with the most recent examples tied to deep earnings recessions — the Covid collapse and the global financial crisis, not the organic AI-driven expansion currently underway. That historical anomaly is now shaping how Wall Street thinks about the equity outlook into 2027.

With nearly 90% of S&P 500 results reported for the June quarter, BofA's data show EPS rising 30% year-on-year excluding investment gains at Alphabet and Amazon, with a 76% EPS beat rate, the strongest since 2021.

According to Reuters, of the 436 companies that had reported through August 8, 85.1% topped analyst expectations, well above the long-term average of 68% since 1994.

JPMorgan raised its 2026 S&P 500 EPS estimate to $365 yesterday, implying roughly 35% year-over-year growth and above the Street consensus of $358, and lifted its year-end price target to 8,000 from 7,800, citing broad-based earnings strength and clearer AI monetisation. That target implies about 3.1% upside from the index's last close of 7,753.11 as of Monday.

JPMorgan noted, however, that private-company stake valuations are boosting reported 2026 EPS by roughly $18 based on first-half marks; stripped of that contribution, normalised EPS would be $347, up approximately 28% year-over-year.

Cloud infrastructure is central to the bull case. AWS revenue growth accelerated to 37% year-over-year in Q2, Azure grew 43%, and Google Cloud posted record 82% growth, reinforcing what JPMorgan strategists described as the AI-capex-to-revenue conversion thesis.

The bank projects consensus AI capital spending of roughly $900 billion by year-end 2026, up 85% year-over-year, and topping $1.2 trillion by end of 2027. "As elevated backlogs convert into recognised revenue, cloud growth should remain well supported, helping validate rising AI capex, strengthen order coverage, and further ease ROIC concerns," JPMorgan analysts said.

At least seven brokerages now share JPMorgan's 8,000 year-end target for the S&P 500, according to Investing.com's market context data, reflecting how thoroughly the earnings upgrade cycle has shifted institutional sentiment.

The index has gained approximately 13.3% year-to-date through early August 2026, buoyed by AI optimism and a Q2 beat rate that materially exceeded historical norms.

"Consensus expects growth to fall below 20% in 1Q27 and moderate to the mid-teens for full-year 2027," the Subramanian team wrote. "While those growth rates are healthy by historical standards, markets tend to become less supportive as earnings growth decelerates, with years of above-trend but slowing EPS growth typically producing weaker equity returns."

The concern is compounded by the unusual nature of the current streak: prior 30%-plus EPS runs followed sharp contractions, giving them a mechanically low base; this one does not.

Several near-term catalysts could validate or complicate that deceleration thesis. July CPI data lands Wednesday, with economists polled by Reuters projecting a 3.4% year-over-year reading versus 3.5% prior, a modest cooling that, if confirmed, would ease pressure on Fed rate expectations and support elevated equity multiples.

The same day brings a $125 billion Treasury note auction, a supply dynamic JPMorgan cited as a reason to keep its forward multiple capped at roughly 20x despite the earnings momentum.