S&P 500 companies kept 16.7% of revenue as profit in the second quarter, the highest since the count began
S&P 500 profit margins spiked to 16.7% in Q2, which is by far their highest level in history.
This is an unprecedented boom fueled by massive EPS gains in big tech, including markups in SpaceX/Anthropic.
S&P 500 companies kept 16.7% of their revenue as profit in the second quarter. It is the highest reading since the count began.
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S&P 500 reporting highest net profit margin in more than 15 years (FactSet Earnings Insight, 2026-07-28)
In the same post the author reached for an old line from Jeremy Grantham. Profit margins are probably the most mean-reverting series in finance, and if they do not revert, something has gone badly wrong with capitalism.
What it means for a margin to revert
When a business keeps unusually much, others move into the space. They cut prices to take the customers, hire away the people, make the same thing for less. The share left over gets shaved down in the process, back toward where it started. That is the property called mean reversion, and it is what Grantham was describing. For it not to revert is for no competitor to be able to walk in.
How far the same quarter moved in three weeks
The figures the author cites include the reports that landed after those dates. That the same quarter moved this much in three weeks means a handful of late reporters pulled the index total upward. FactSet noted in the same piece that removing Alphabet alone takes the margin down by 1.3 percentage points. The author's premise, that this is a record, holds. What the record rests on is narrower than the post suggests.
Retrieved 2026-08-04 · FactSet Earnings Insight, 2026-07-17 and 2026-07-28
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S&P 500 earnings season update, blended earnings growth of 24.7% (FactSet Earnings Insight, 2026-07-17)The author writes that the result came from large gains in big tech earnings per share, including markups on SpaceX and Anthropic stakes. A markup is not money taken in from selling something. It is a fresh valuation put on a stake already held. There is no reason for the same company to remark the same stake by the same amount next quarter. The argument on the other side says reversion is not the right worry here. The companies that lifted this margin sit where competitors cannot easily walk in, so what they keep may last. Facing one number, one side sees something one-off that comes back down, the other sees a structure that has changed.
What the third quarter of 2026 answers
The two readings separate in the next set of numbers. If the third-quarter margin comes in below this one, the reversion case holds; if it holds the line, the changed-structure case does. There is a second thing worth watching. Whether the figure still collapses when a few names are removed, or whether it rises evenly across the index. The same margin means one group of companies is doing well in the first case, and corporate America is in the second.
- The slice listed America keeps out of every dollar of sales is the thickest on record, and earnings growth is the fastest since the second quarter of 2021.
- When a slice gets thick, new competitors normally arrive and thin it again, but this time the thick part sits where competitors cannot easily walk in.
- So the judgement turns not on the size of the record but on whether the number survives next quarter once a few names are removed.
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Sources
- Original Charlie Bilello (@charliebilello) · S&P 500 profit margins spiked to their highest level in history in Q2 · 2026-08-03
- FactSet Earnings Insight Blended Q2 net profit margin of 15.7%, 14.4% excluding Alphabet, against a previous record of 14.8% in Q1 (2026-07-28)
- FactSet Earnings Insight Blended Q2 earnings growth rate of 24.7% as of 17 July (2026-07-17)
Retrieved 2026-08-04 · FactSet figures are blended counts as of each report's publication date; the 16.7% and 47% the author cites include reports filed after those dates.