AI still headlines, but new stock market stories emerge from Q2 earnings

AI-influenced stocks continued to headline the Q2 earnings season, which impressed across all metrics. But other compelling stories may be percolating beneath the surface. Carrie King, Global CIO of BlackRock Fundamental Equities, digs into three potentially underappreciated opportunities.

U.S. company earnings exceeded already high expectations in the second quarter, with S&P 500 earnings growth looking set to settle at 50% year-over-year (yoy). Q2 also featured the highest profit margins in more than 15 years at nearly 17%.

As in the prior quarter, earnings data was skewed by some extraordinary one-off profit boosters among the “Magnificent 7” cohort, but the results were impressive even without them. S&P 500 earnings ex-Mag7 are expected to grow 31% for Q2, marking the second consecutive quarter of above-20% earnings growth. Full-year results are equally robust. If earnings meet expectations, 2026 will be the third straight calendar year of double-digit earnings growth, an achievement not seen in 20 years, as shown in the chart below.

Earnings on a roll
Calendar year EPS growth, 1997-2027(E)

Investor attention over the past few years has centered on artificial intelligence (AI) and its influence on company earnings and the related market outlook. Yet the sector leader in this earnings season was neither technology nor comms services. It was energy, with 147% earnings per share (EPS) growth. This is an important reminder that the market stories, even when heavily influenced by AI, can also extend beyond it.

With that in mind, we highlight three observations from recent earnings trends that we believe point to underappreciated market narratives and potential opportunities for investors:

1. A broadening cyclical upswing

Unprecedented capital spending on the AI buildout is trickling through the economy, with one outgrowth being a projected earnings acceleration across the industrials and materials sectors.

This punctuates what we see as a cyclical recovery happening under the hood, marked by six straight months of U.S. manufacturing expansion since the start of the year¹ and NFIB survey data showing that business owners anticipate improving conditions in the months ahead.²

Opportunities directly linked to the AI data center buildout are well acknowledged by the market. Yet we also see opportunity in traditional cyclical industries such as logistics, airlines and packaging.

• Logistics: After a multi-year freight recession, U.S. industrial activity and inventory replenishment have started to improve, helping to stabilize package volumes and truckload demand after years of excess capacity. Air freight & logistics companies are expected to see earnings growth improve from -12% in 2026 to 15% in 2027.
• Airlines: Consumer resilience is supporting demand for air travel. Despite volatile fuel cost inflation, airlines have moderated capacity growth and stabilized maintenance costs, all contributing to the bottom line. Airlines are expected to see earnings growth accelerate from 22% in 2026 to 40% in 2027.
• Packaging: Improving industrial production and demand for consumer packaged goods are driving a volume recovery for packaging companies. The industry is also benefiting from margin expansion driven by both price inflation and raw material cost deflation. Packaging companies are expected to see earnings growth jump from 18% in 2026 to 46% in 2027.

2. The ‘other’ semis

Analog semiconductors are benefiting from the industrial recovery and an improving inventory cycle, tailwinds that can translate to operating leverage as companies maintain margins alongside a return to positive volume growth.

Analog semiconductors are key components in the automotive industry, where auto inventories are normalizing and chip content per vehicle continues to grow. Management teams are describing current conditions as an inflection point and analyst estimates suggest select analog semiconductor companies could see earnings growth notch up from 32% in 2026 to 42% in 2027.

3. Forgotten financials

The cyclical rebound we highlighted earlier shows signs of manifesting in earnings across the financials sector, an area that hasn’t received enough attention, in our view.

U.S. money center and investment banks grew Q2 earnings over 30%, supported by strong investment banking, trading and capital markets activity in addition to subdued loan delinquencies and an uptick in loan growth from depressed levels.

Meanwhile, consumer finance companies have an outlook for earnings acceleration driven by credit normalization, lower funding costs and a resilient consumer. Despite concerns about a weaker consumer, purchase volumes remain healthy and higher transaction volumes support fee income and receivable growth.

Our analysis of earnings commentary finds that more companies in the financials sector are making mention of tangible financial uplift from AI, an increase of 100% relative to Q2 2025. This highlights a trend seen in varying degrees across many sectors, as shown in the chart below.

More companies citing AI-related financial uplift
Percent change in number of companies mentioning AI benefits, Q2 2025 to Q2 2026

Bottom line: The AI mega force continues to fuel activity across sectors. Yet a dramatic drawdown in momentum in July reminds us that diversification still matters ― and Q2 earnings give us reason to believe that opportunities exist both within and beyond the dominant AI theme.

Applying fundamental research and analysis at the company level can help to identify opportunities that the market may be underappreciating, just as bouts of volatility also may present moments to add to fundamentally sound stocks that may be unduly punished in market drawdowns. I’ve said it before, but it bears repeating: It’s an exciting time to be an active investor.