Bold claim: a 2026 earnings upturn is coming, and it may come from the quiet, hardworking corners of the market rather than the AI megastars.
Goldman Sachs believes the market is underestimating the strength of next year’s earnings growth, and that the real upside lies in cyclicals rather than the headline AI titans. While AI headlines dominate attention, Goldman argues the macro backdrop will drive a broader earnings surge that investors aren’t pricing in yet.
What does this mean for sectors? In their latest note, Goldman’s team says the acceleration in 2026 economic growth should lift EPS most in cyclical areas such as Industrials, Materials, and Consumer Discretionary. They also note that this forecast assumes easing tariff pressures and other macro factors point in a favorable direction.
Specific sector forecasts include real estate, where EPS growth is expected to rise from about 5% this year to roughly 15% next year, and consumer discretionary, from around 3% to about 7%. Industrial companies look set for a strong rebound, with EPS growth anticipated to jump from 4% to 15%.
In contrast, information technology is projected to see more modest growth, with EPS rising 26% in 2025 and about 24% in 2026.
Market signals already hint at a pivot toward cyclical strength. Goldman notes that cyclical stocks have outperformed defensives for 14 trading days through the previous Thursday—the longest such streak in over 15 years. Yet, the firm emphasizes that this streak doesn’t fully capture the breadth of their more bullish growth scenario and that investors may still be underestimating the pace of 2026’s expansion.
According to Goldman, overall U.S. growth is likely to accelerate next year, helping to lift S&P 500 earnings per share by about 12%. They also point to a gap between market pricing and their forecast: sentiment often implies growth closer to 2% rather than the 2.5% they expect.
The backdrop comes as debates continue about whether today’s market is riding an AI-led bubble. The S&P 500 has gained about 16% in the year, with the so-called Magnificent Seven absorbing a substantial portion of index weight, and Nvidia’s stock performance this year underscoring AI’s headline-grabbing influence.
Goldman’s view adds nuance: while AI and related chip plays draw attention, the bigger, steadier driver could be a broader macro expansion that lifts earnings across multiple sectors—especially those tied to economic activity and consumption.
What do you think? Do you agree that the coming earnings boom may primarily come from cyclical stocks rather than AI leaders, or do you think AI’s impact will outsize traditional sectors as it scales further? Share your perspective in the comments.
