Key Takeaways:
Tech sector earnings are growing at their fastest pace in years while valuations have fallen, creating what one strategist calls a buying opportunity for equity investors.
Tech earnings are growing at a 21% clip while valuations have compressed, creating an attractive setup for equity investors, according to Seaport Global's Jonathan Golub.
"Earnings are absolutely on fire, and valuations are lower almost everywhere," Golub, chief market strategist at Seaport Global Holdings, said on Bloomberg Television.
S&P 500 companies are on track to report second-quarter earnings growth of 21.2% from a year earlier on 10.8% higher revenue, according to Zacks data. The technology sector has been a key contributor, with aggregate estimates rising since the quarter began in April. That follows a first-quarter season where total earnings climbed 25.8% year over year, with 80.6% of companies beating EPS estimates and 79.8% beating on revenue.
The bullish call comes as tech stocks have faced pressure from AI-related spending concerns and valuation uncertainty. Oracle and Adobe report quarterly results this week — Oracle on Wednesday and Adobe on Thursday — with Oracle expected to post $1.96 a share on $19.08 billion in revenue, representing year-over-year growth of 15.3% and 20%, respectively.
The broader earnings picture shows positive revision momentum across sectors. Aggregate estimates for the S&P 500 have moved higher since April, with the energy sector enjoying the most pronounced upgrade — up more than 80% since the start of the quarter. Outside of energy and technology, however, the revisions trend has been negative, with transportation, medical, consumer discretionary, autos, and construction seeing the most downward pressure.
The tech sector's resilience comes despite a sharp sell-off in Asian semiconductor stocks last week, triggered by Broadcom's quarterly revenue miss. The rout wiped an estimated $1.8 trillion from S&P 500 market capitalization and sent shares of Samsung Electronics, SK Hynix, and TSMC lower, showing how dependent global markets have become on AI-related companies for growth.
Oracle and Adobe in Focus
Oracle is expected to report fiscal fourth-quarter results on Wednesday, with investors focused on the company's AI-driven data center spending plans. The company's capital expenditure needs exceed its internal cash flows, requiring outside funding through at least the next three years, according to the Zacks preview. Adobe reports the following day, with consensus estimates calling for $5.83 a share on $6.46 billion in revenue, representing year-over-year growth of 15.2% and 9.9%, respectively.
Golub's call signals that the earnings growth story remains intact even as valuations have reset, potentially offering a buying opportunity for investors who have been waiting for lower entry points. The key test comes this week with Oracle and Adobe results, followed by the broader Q2 earnings season when major banks report in mid-July.
This article is for informational purposes only and does not constitute investment advice.
