The Magnificent 7 group of companies has delivered the strongest quarterly earnings growth in their history, and the numbers are eye-popping enough to demand a closer look.

With NVIDIA reporting actual results for Q2 on August 26, all seven companies in the Magnificent 7 have now reported earnings for the second quarter, according to FactSet data.

Most of the Magnificent Seven tech companies, including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, are under pressure. In June, the group lost over $2.2 trillion in combined market value, reflecting a significant shift away from companies heavily investing in AI infrastructure.

Recent major investments in AI by the Magnificent Seven companies have raised investor concerns about whether such high capital expenditures will lead to sufficient profits to validate their increased share prices and valuations. Additionally, profit margins are being squeezed by escalating costs of components such as memory chips and electrical equipment.

Magnificent 7 Earnings Growth

The Magnificent 7 companies reported actual earnings growth of 118.5% for the second quarter, which is the highest earnings growth rate reported by these seven companies going back to at least Q4 2020 (when Tesla joined the S&P 500), reports FactSet.

On the other hand, the earnings growth rate for the other 493 S&P 500 companies for Q2 is 31.8%, which is the highest earnings growth rate reported by this group of companies since Q4 2021 (32.4%).

The top five contributors to earnings growth for the S&P 500 for Q2 2026 are (in order) Alphabet, Amazon.com, Micron Technology, NVIDIA, and Chevron. Thus, three of the top five contributors are Magnificent 7 companies.

The Real Story Behind the Numbers

Both Alphabet and Amazon.com reported substantial increases in other income for the second quarter due to investment gains, which were included in their (GAAP) EPS numbers. 

The (GAAP) EPS actual for Alphabet for Q2 included a gain of $98 billion in other income primarily due to net unrealized gains on equity securities, while the (GAAP) EPS actual for Amazon.com for Q2 included a gain of $53.4 billion in other income primarily due to investments in Anthropic.

Strip these two companies out, and the picture changes sharply. Excluding Alphabet and Amazon.com, the earnings growth rate for the Magnificent 7 companies falls to 43.2% from 118.5% and the earnings surprise percentage for the Magnificent 7 companies for Q2 falls to 4.4% from 66.2%, FactSet reported.

GAAP vs Non-GAAP, Why It Matters Here

While all publicly traded US companies report EPS on a GAAP basis, many also choose to report on a non-GAAP basis, and opinion is divided on how useful that practice is.

Supporters argue non-GAAP figures better reflect day-to-day operating performance by excluding one-time or nonoperating items. Critics counter that there’s no industry standard for what counts as non-GAAP, leaving room for companies to exclude items that would otherwise weigh down earnings.

NVIDIA, Micron Technology, and Chevron fall into the non-GAAP camp, as most analysts covering these three companies report EPS estimates on a non-GAAP basis, and that’s what was used for their surprise and growth calculations. Chevron and NVIDIA actually reported lower non-GAAP EPS than GAAP EPS, while Micron Technology reported higher non-GAAP EPS than GAAP. Notably, NVIDIA’s non-GAAP EPS excluded investment gains entirely.

What Comes Next

Looking ahead, the growth story is expected to flip. Analysts expect the other 493 S&P 500 companies to report higher earnings growth than the Magnificent 7 in Q4 2026, projected at 26.8% versus 23.2%.

According to Bloomberg Intelligence, full-year profit estimates for the S&P 500 are increasing, driven by the artificial intelligence boom and robust first-half earnings. Notably, 86% of companies in the S&P 500 exceeded analyst expectations, marking the highest percentage since 2021.

Bottom Line

The headline 118.5% earnings growth figure for the Magnificent 7 is real, but it’s largely a story of two companies’ investment portfolios rather than broad-based operational strength.

Once Alphabet’s and Amazon’s investment-driven gains are stripped out, growth for the group settles closer to 43.2%, still healthy, but far from triple digits.

With Q4 expectations now favoring the rest of the S&P 500 over the Magnificent 7, investors may want to watch whether this quarter’s numbers mark a peak rather than a new normal.

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