Investing.com -- Raymond James released an analysis of second-quarter 2026 earnings across the S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes.

The firm reported that earnings per share revisions were positive for the fifth consecutive quarter across all three market capitalizations. Raymond James noted that such sustained positive revisions typically occur early in economic cycles.

S&P 500 earnings per share growth is projected to exceed 25% in 2026, even after accounting for write-ups of private investments and a 1% positive impact from tariff refunds. Small and mid-cap index earnings per share for 2026 continued to rise, with year-over-year consensus earnings per share up 14-20%.

Earnings revision diffusion has been above zero since July 2025 and improved during the second-quarter 2026 earnings season. Materials was the only sector with worse than typical earnings per share revisions across small, mid, and large cap. Ten of the 11 sectors saw better than typical earnings per share revisions.

Large hyperscaler free cash flow estimates for 2026 now stand at negative $45 billion, down from approximately $250 billion two years ago. Consensus estimates project this to drop to negative $130 billion in 2027. Raymond James identified this as the biggest risk to equity markets.

Cyclical sector year-over-year earnings per share growth has been strong and accelerating. Energy, Materials, Technology, and Financials are expected to decelerate from a growth peak in the second quarter as growth returns to more normal levels in 2027. Industrials and Consumer Discretionary are still expected to accelerate.

Defensive sector year-over-year earnings per share is expected to improve over the next six quarters. Price-to-earnings valuations are historically high across large and mid-cap equities and in line with historic averages in small cap.