Q2 2026 Earnings Season Wrap: What the Headline Numbers Did and Didn't Tell Long-Term Investors

Second-quarter 2026 earnings season produced the strongest headline numbers in five years — and one of the clearest recent reminders that a headline number and a business are different things. Below are four themes from the season, drawn from the large, widely followed companies we cover in these Market Notes, plus what the quarter suggested about business quality. These companies are discussed because they are market-moving and instructive, not as recommendations (see the disclosures below). With Nvidia's (Nasdaq: NVDA) August 26 report, the season is now complete.

What did the season's headline earnings number actually measure?

Less than it appeared. Per FactSet's August 28 Earnings Insight, with 97% of the S&P 500 reported, blended earnings growth for the quarter was 52.0% — the index's highest rate since the second quarter of 2021 — against an estimate of 23.1% on June 30. But the growth was concentrated. FactSet's companion analysis shows the seven largest technology companies reported earnings growth of 118.5%, while the other 493 companies grew 31.8%. Two companies drove much of the gap: Alphabet's (Nasdaq: GOOGL) GAAP results included a $98 billion gain in other income, primarily net unrealized gains on equity securities, and Amazon's (Nasdaq: AMZN) included a $53.4 billion gain primarily tied to its investments in Anthropic. Excluding those two, the group of seven's growth rate falls to 43.2%.

Nvidia illustrated the same point from the other direction. Its GAAP earnings per share of $2.46 exceeded its non-GAAP figure of $2.22 because, as its Q2 FY2027 release and FactSet both note, the non-GAAP number excludes investment gains — an unusual case of the adjusted figure being the lower one.

The distortions ran both ways. Intel (Nasdaq: INTC) reported an $11.0 billion GAAP net loss on its strongest revenue growth in more than fifteen years, almost entirely because of a $12.5 billion non-cash mark-to-market charge on shares held in escrow under its CHIPS Act agreement (SEC Form 8-K). Eli Lilly's (NYSE: LLY) earnings absorbed $3.03 per share of acquired in-process R&D charges, against revenue that rose 48% (Form 8-K). Meta Platforms (Nasdaq: META) grew revenue 28% to $60.8 billion, yet earnings per share fell 13% as costs — including $2.4 billion of legal charges and $1.18 billion of severance — rose faster (SEC Form 8-K).

Tariff refunds appeared at several consumer-facing companies. Target (NYSE: TGT) recognized $994 million of them, worth $1.65 per share; the company reported that its earnings per share, which doubled on a GAAP basis, rose 20% excluding those refunds (SEC Form 8-K, Ex. 99). Apple's (Nasdaq: AAPL) June-quarter earnings included an $0.11 benefit from the same source (Apple press release). The practical takeaway is unglamorous: this was a season in which reported net income was one of the less informative lines on the page.

Who is paying for the AI build-out, and who is getting paid?

The two sides separated clearly. On the paying side, Alphabet lifted full-year capital spending guidance to $195–$205 billion from $180–$190 billion, and its free cash flow turned negative in the quarter (SEC Form 8-K). Amazon said on its call that 2026 cash capital spending is now expected near $220 billion, and reported trailing-twelve-month free cash flow of negative $7.6 billion (call transcript; SEC Form 8-K). Meta's full-year capital spending guidance stood at $130–$145 billion. SpaceX (Nasdaq: SPCX), in its first quarter as a public company, spent $18.4 billion on capital projects against $7.8 billion of revenue (Q2 results).

On the receiving side, suppliers booked that spending as revenue. Nvidia reported quarterly revenue of $96.2 billion, up 106% from a year earlier, with data center revenue of $89.0 billion up 117% and gross margin of 75.0% (Q2 FY2027 release). The same release shows the other side of the ledger: operating expenses rose 55%, and the company's third-quarter outlook of $108.0 billion assumes no data center compute revenue from China. Taiwan Semiconductor (NYSE: TSM) reported revenue of $40.2 billion, up 33.7%, at a 67.7% gross margin, while guiding to some gross-margin moderation ahead (SEC 6-K). Applied Materials (Nasdaq: AMAT) posted record revenue of $9.12 billion, up 25%, even as China fell to 28% of revenue from 35% a year earlier (Q3 results). Cisco (Nasdaq: CSCO) booked $4 billion of AI infrastructure orders from hyperscalers in the quarter, while services revenue was flat and non-GAAP gross margin of 66.3% was down 210 basis points (SEC Form 8-K, Ex. 99.1).

The asymmetry matters. Suppliers recognize the spending as revenue today; the spenders record it as assets that must earn a return over years. Neither is inherently better, and both carry risk — supplier revenue is order-driven and can slow quickly. But they are different financial profiles sharing one label.

What did the retailers say about the American consumer?

The season's last major reports came from retail, and they described a shopper who is still spending but appears deliberate about it. Walmart (Nasdaq: WMT) reported revenue of $187.9 billion, up 5.9%, with U.S. comparable sales up 2.6% — transactions up 1.5%, average ticket up 1.1% — and global eCommerce up 23% (Q2 FY27 release). The same release shows the mixed side: GAAP earnings per share fell 9.1% to $0.80 even as operating income rose 28.8%, because a $2.7 billion gain on equity and other investments a year earlier became a $1.2 billion loss this quarter; six-month free cash flow declined $1.4 billion; and pharmacy deflation was a 125 basis point headwind to U.S. comparable sales.

Target's comparable sales rose 3.8%, driven by a 3.6% increase in comparable traffic, after the company reduced prices on more than 10,000 frequently purchased items over the past year — though its SG&A expense rate rose to 21.6% from 21.3%. Home Depot (NYSE: HD) showed a different pattern: sales rose 5.7% and comparable sales 1.7%, but comparable customer transactions fell 1.0% while average ticket rose 2.8%, operating margin slipped to 14.3% from 14.5%, and the company reaffirmed rather than raised full-year guidance (IR release).

Read together, the value-oriented retailers reported rising traffic while the housing-linked retailer reported higher average tickets on fewer visits — more nuanced than either "the consumer is fine" or "the consumer is cracking," and the kind of detail that only shows up below the headline.

Why did so many record quarters get sold?

Repeatedly this season, a company reported a record and its shares declined anyway. AMD (Nasdaq: AMD) posted record revenue of $11.5 billion, up 50%, though gaming revenue fell 31% and operating expenses rose 40%; the shares closed 7% lower the following day (CNBC). Applied Materials set several records and its shares fell 5.24% in after-hours trading (Investing.com). Apple posted its strongest June quarter ever and its shares fell more than 6% in extended trading on softer guidance (CNBC). SpaceX grew revenue 92%; its shares fell 13.6% the next session (CNBC). The exception came at the very end of the season: Nvidia's shares rose nearly 9% the day after its report (CNBC) — a reminder that the reaction depends on what was priced in, not on whether a record was set.

The market prices expectations, not results. Per FactSet's August 28 report, 86% of companies exceeded EPS estimates — against a five-year average of 78% (FactSet, August 7) — and the index's forward 12-month P/E stood at 19.6, below its five-year average of 19.9 but above its 10-year average of 19.0. The bar going in was high. Earnings-day reactions indicate what was expected. They do not indicate what any business is worth.

What did this season reveal about "quality"?

Durability is harder to see than a beat. Three markers were visible this quarter, each cutting more than one way.

Cash conversion, not just growth. SpaceX and Palantir (Nasdaq: PLTR) both grew revenue roughly 92–93%. Palantir generated $1.22 billion of adjusted free cash flow on $1.935 billion of revenue, while its adjusted expenses rose 37% and 81% of revenue came from the U.S. (SEC Form 8-K, Ex. 99.1). SpaceX spent well beyond its revenue. Similar growth headlines, very different cash profiles — and concentration risk in both.

Pricing power is not the same as raising prices. Lilly's revenue rose 48% on volume up 60% against realized prices down 13% — growth despite price, not because of it. Target grew traffic after cutting prices. Home Depot grew average ticket while transactions declined. Three different answers to who holds the pricing pen, none of them free.

Balance sheets mattered. CoreWeave (Nasdaq: CRWV) grew revenue 112% to $2.6 billion and reported a roughly $104 billion revenue backlog, while net interest expense reached $640 million and its net loss widened to $626 million (SEC Form 8-K, Ex. 99.1). Growth financed by debt carries different obligations in a downturn than growth financed by operations — a distinction that tends to matter when it is least convenient.

The bottom line

By the index's own arithmetic, Q2 2026 was an unusually strong quarter — 52% earnings growth on a final count, the most since 2021. It was also one in which the headline understated some businesses, overstated others, and drew a meaningful share of its growth from two companies' investment portfolios, with seven companies growing at more than three times the rate of the other 493.

A note worth highlighting: The useful work of earnings season is not deciding what to buy or sell. It is updating your understanding of how a handful of large businesses actually make money, what they are spending to keep making it, and how much of a reported profit reflects operations. One quarter is information. It is not instruction.

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