Analysts Raised Third-Quarter Estimates in July, Breaking a Two-Decade Habit
There is a rhythm to Wall Street estimate revisions that rarely varies: analysts publish forecasts, then trim them steadily as a quarter unfolds, leaving a lower bar for companies to clear by the time results arrive. That rhythm has broken twice in a row, and the second-quarter reporting season is the reason.
According to a FactSet analysis published August 6, the bottom-up earnings-per-share estimate for the S&P 500 for the third quarter of 2026 increased by 0.3% during July, rising to $88.95 from $88.67 between June 30 and July 30. The bottom-up estimate aggregates the median forecasts for every company in the index, so it functions as a rough proxy for what the sell side collectively expects the index to earn.
The historical comparison is what gives the move weight. FactSet's data show that during the first month of a quarter, the bottom-up EPS estimate has declined on average by 1.0% over the past five years, 1.3% over ten years, 1.7% over fifteen years and 1.9% over twenty years. An increase of any size at this point in a quarter is the exception rather than the rule, and FactSet notes this marks the second consecutive quarter and the fourth time in the past five quarters that estimates moved up during the opening month.
FactSet addressed head-on the question many investors were asking. With crude oil trading sharply higher than a year ago, the expectation was that analysts would cut estimates more aggressively than usual on the assumption that energy costs would compress margins elsewhere. The report's answer was blunt: no. Higher oil prices have not translated into outsized reductions to third-quarter forecasts.
At the sector level, the revisions were uneven. Energy saw the largest increase in its third-quarter EPS estimate at 2.6%, followed by financials at 1.7%. Materials moved the other way, with analysts cutting the sector's third-quarter estimate by 5.0%. That split roughly mirrors the pattern visible in second-quarter results, where energy has been the growth engine and the more cyclical, input-cost-sensitive corners of the index have lagged.
The full-year revision is larger still. FactSet reports that over the same June 30 to July 30 window, the calendar 2026 bottom-up EPS estimate for the index climbed 3.2%, to $351.33 from $340.49. A move of that magnitude in a single month reflects both the strength of reported second-quarter results and, in part, the valuation gains at a few megacap companies that have distorted index-level figures throughout this season.
The practical consequence is that the bar for coming quarters is rising rather than falling. Companies reporting third-quarter results in October will face consensus numbers that were revised up rather than down, which removes some of the mechanical cushion that has helped produce this season's unusually high beat rates. FactSet's separate August 10 compilation puts estimated third-quarter revenue growth at 11.3%.
For now, the revision data reinforce what the guidance data already suggested: the sell side and corporate managements are moving in the same direction, and both are more confident than the historical playbook would predict. Whether that confidence proves warranted depends on the same variables that shaped this quarter, chiefly energy prices and the durability of AI-related capital spending.
