Bank of America raised its 2025 earnings per share forecast for S&P 500 companies to $271 from $262 previously, implying 12% growth. The bank cited impressive second-quarter guidance and adjustments, as well as companies’ ability to maintain profit margins through tariff reductions, cost cuts, and productivity improvements.
Bank of America strategists said these factors will support stronger growth in the second half of the year.
Strong revenue growth in the tech sector shows evidence of monetization of artificial intelligence, while non-tech sectors are also achieving growth through supply chain transformation and efficiency measures.
Bank of America set its 2026 earnings per share forecast at $298, a 10% increase from the previous year. “After two years in which a small number of companies shouldered the bulk of the earnings burden, the 2026 forecast shows a wider distribution of expectations,” strategist Savita Subramanian said in a report.
She described tail risks as “positive,” noting that nominal GDP growth will translate into sales growth, efficiency gains will lead to profit growth, and a potential capital expenditure cycle will provide operating leverage. Stock buybacks and a weaker dollar are expected to provide additional support. Bank of America’s model predicts that net buybacks will contribute 75 basis points to earnings per share growth, slightly below recent levels. Its foreign exchange team predicts that the dollar will decline by 5% against the euro in 2025 and 7% in 2026, respectively, which could boost S&P 500 sales by 1.5-2 percentage points annually.
At the same time, Subramanian noted potential risks that could impact earnings. “The full impact of tariffs will likely not be felt until the second half of the year,” the strategist said, as mitigation strategies like pre-ordering are unlikely to be sustainable.
Inflation could have a mixed effect, benefiting cyclical sectors like energy and materials while hurting labor-intensive sectors like consumer staples and healthcare.
Profit margins for small businesses could be squeezed unless interest rates are further cut, but Subramanian noted, “If inflation rises, the extent to which short-term rates can fall may be limited.”
The strategist also warned that rising long-term yields could create additional headwinds, impacting mortgage costs and stock valuations.
Tech earnings are expected to remain healthy but slow through 2026 as large companies increase capital spending and rely on artificial intelligence to achieve profitability.
