Will S&P 500 earnings growth finally exceed the levels of the Magnificent Seven?

The Magnificent Seven’s lead in driving most of the S&P 500’s earnings growth could soon come to an end as analysts predict second-quarter 2024 earnings will show a slowdown in growth across the board, while the remaining 493 companies are set to post their first quarter of growth since the fourth quarter of 2022.

The Magnificent Seven, a group that includes Microsoft (MSFT), Amazon (AMZN), Meta (META), Apple (AAPL), Alphabet (GOOGL), Nvidia (NVDA) and Tesla (TSLA), have dominated S&P 500 profit growth over the past three quarters, but Bank of America analysts expect second-quarter results to show growth extending beyond a small group of stocks.

‘Other 493’ S&P 500 to Post Earnings Growth

Bank of America analysts predict that S&P 500 companies (excluding the Magnificent 7) will post their first quarter of growth since the fourth quarter of 2022.

Analysts are predicting a slowdown in growth for the Magnificent 7 while the remaining 493 companies in the S&P 500 Index are expected to grow, which could be the start of a broadening bullish trend across the market.

Second-quarter earnings are estimated to rise 10% year over year for the S&P 500 and 6% for the index excluding the Magnificent 7, the first positive change since the fourth quarter of 2022.

Analysts said they generally expect a “typical 2% beat” in S&P 500 earnings per share (EPS) in the second quarter. A 2% beat would be in line with the historical average but would be the smallest quarterly EPS beat seen since the fourth quarter of 2022.

Magnificent 7 growth to slow for second straight quarter

Magnificent 7 has powered S&P 500 earnings growth over the past three quarters and accounted for more than half (59.5%) of the S&P 500’s total return in the first half of the year, according to LPL Financial. However, analysts expect the group to post a second straight quarter of decelerating earnings growth.

The slowdown in growth for the Magnificent Seven is expected to be offset by the other 493 companies in the S&P 500, but the group’s weak earnings may have investors wondering whether the Magnificent Seven’s good streak is coming to an end.

Enthusiasm for artificial intelligence (AI) has fueled strong performance by the Magnificent Seven in recent quarters, but some experts have expressed concern that investor expectations have become so high that companies may struggle to meet them.

Nvidia, Meta, Alphabet, Amazon, Microsoft, and Apple have all outpaced the S&P 500 since the start of 2024. The only member of the Magnificent Seven not to do so is Tesla, which has gained just 6.6% in the period after reversing losses from the first half of the year with a recent rally fueled by better-than-expected second-quarter delivery results and expectations related to its upcoming robotaxi.