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US chipmakers' expected profit growth slows to 136%, more than four times the S&P 500's pace
LSEG expects US chipmakers' third-quarter profit growth to slow to about 136% from 158% while S&P 500 earnings rise about 31%. Analysts have raised that quarter's forecast at half their earlier pace since July, so the AI earnings carrying the index are losing speed.
The Investor · Invest desk
What happened
- Tech companies plus Alphabet, Amazon.com and Meta Platforms are set to account for two-thirds of the index's earnings gain, LSEG's Tajinder Dhillon said.
- Second-quarter blended growth of 53.7% was the fastest since 2021 but falls to about 35% once mark-to-market gains on Alphabet's and Amazon's AI stakes are excluded.
- Nick Raich, CEO of research firm the Earnings Scout, said momentum in upward estimate revisions is beginning to slow.
- Microsoft, Alphabet, Amazon, Meta and Oracle raised planned capital spending from about $485 billion in January to about $730 billion by July.
- LSEG's scorecard expects index earnings growth to keep easing: 28.9% for Q4, then 19.8% for the opening quarter of 2027.
Why it matters
- exposure Outside tech, Alphabet, Amazon and Meta, the rest of the S&P 500 supplies only about 10 points of the expected 30.6%, so a pullback in AI spending would find little elsewhere in the index to offset it.
- cost Alphabet's AI bill took its June-quarter free cash flow to negative $5.9 billion, so chipmaker growth now depends on customers willing to keep spending more than their operations bring in.
- decision With investors pressing Big Tech to turn spending into returns, the next call on chipmaker earnings sits in the buyers' 2026 budgets, where Alphabet has lifted its forecast to $195 billion to $205 billion.
The third-quarter forecast kept rising all year, in shrinking steps. LSEG's blended estimate gained 6.2 points between January 1 and April 1 and 6.3 points between April 1 and July 1, then 3.0 points from July 1 to October 9 [19]. Across the year it roughly doubled, from 15.1% to 30.6% [27]. The index still set a record high this week on tech gains [14].
Nick Raich of the Earnings Scout compared the AI build-out to a car slowing from 150 to 100 miles an hour over three months, Cryptopolitan reported [5]. The chipmaker figures are milder than his picture. Going from 158% to 136% takes 22 points off the growth rate, about a seventh of it, while his car loses a third of its speed [18]. At 136%, chipmakers are still growing about 4.4 times as fast as the index [20].
Most of the index's own slowdown comes from the comparison quarter. Blended growth falls 23.1 points from the second quarter to the third [9]. About 18.7 of those points are the gap between the second quarter's 53.7% headline and its roughly 35% rate without the AI-stake gains at Alphabet and Amazon. That leaves a real deceleration of about 4.4 points [21]. Earnings are also growing about 2.6 times as fast as revenue, 30.6% against 11.8%, so margins across the index are still widening [25].
Chipmakers' revenue comes out of their customers' capital budgets. The five largest spenders added roughly $245 billion to their planned budgets between January and July, an increase of about half [22]. Supplier results are still beating expectations. Micron guided above estimates last month and holds $32 billion of customer commitments under long-term supply agreements [6]. Samsung guided to a record 107.4 trillion won of operating profit, about 1.3 trillion won or 1.2% above what analysts expected [7][23]. TSMC put its estimated third-quarter revenue at a record NT$1.49 trillion, above the top of its own guidance [8].
Earnings season, which JPMorgan Chase and Goldman Sachs open next week, could restart the upgrades [14]. So far 84.2% of the 19 companies that reported early beat estimates, which is a small sample [11]. The consensus path could hold instead, with growth easing to the scorecard's 19.8% by the first quarter of 2027, 10.8 points below the current quarter [26]. Or the buyers could trim their budgets, and chip growth would then fall faster than that path assumes. I think the second outcome is the likeliest. The slowdown is already in the published estimates, and the companies paying for it kept raising their spending plans through July [15]. That view is wrong if the 2027 estimate starts climbing the way the third-quarter figure did from 15.1% [10], or if one of the large spenders cuts its capital-spending guidance.
What to watch
- JPMorgan Chase and Goldman Sachs open earnings season next week, the first test of whether the 84.2% early beat rate holds across a larger sample.
- Samsung reports full third-quarter results on Oct. 29, against guidance of about 107.4 trillion won in operating profit.
- Whether LSEG's 19.8% estimate for the first quarter of 2027 rises or falls as the large AI spenders report and update their capital-spending plans.
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- [1]
US semiconductor companies are expected to report third-quarter earnings growth of about 136%, down from about 158% in the second quarter, Tajinder Dhillon, LSEG's head of earnings and equity research, said on Friday.
- [2]
Overall S&P 500 profits are expected to be up about 31% from a year ago, analysts said.
- [3]
Dhillon said the tech sector, plus Alphabet, Amazon.com and Meta Platforms, is set to account for two-thirds of the index's gains.
- [4]
Momentum in upward estimate revisions is beginning to slow, said Nick Raich, CEO of research firm the Earnings Scout.
- [5]
Raich likened the AI infrastructure build-out to a car slowing down from 150 to 100 miles an hour over a period of three months, and said the latest results from Micron Technology were still strong.
- [6]
Last month Micron guided above estimates for its current quarter; its long-term supply agreements now have $32 billion in customer commitments.
- [7]
Samsung guided to a record third-quarter operating profit of around 107.4 trillion won, slightly above the 106.1 trillion won analysts expected, which would be its fourth straight record quarter; full results are due Oct. 29.
- [8]
TSMC reported September revenue of NT$511.86 billion, up 54.6% year on year; its estimated third-quarter revenue hit a record NT$1.49 trillion, above the top of its own guidance.
- [9]
LSEG's earnings scorecard for October 9 puts blended S&P 500 earnings growth for the third quarter at 30.6%, compared with 53.7% in the second quarter.
- [10]
The blended third-quarter estimate was 15.1% on Jan. 1, 21.3% on April 1 and 27.6% on July 1.
- [11]
Of the 19 index members that reported early, 84.2% beat analyst estimates; blended revenue growth is 11.8%.
- [12]
The scorecard expects S&P 500 earnings growth to decelerate to 28.9% in the fourth quarter and 19.8% in the first quarter of 2027.
- [13]
Second-quarter S&P 500 earnings growth, blended at 53.7%, was the fastest since 2021, and was some 35% with the mark-to-market gains on AI stakes excluded for Alphabet and Amazon.com.
- [14]
JPMorgan Chase and Goldman Sachs kick off the earnings season next week; the S&P 500 hit a record high this week on tech gains.
- [15]
Microsoft, Alphabet, Amazon, Meta Platforms and Oracle's planned capital spending climbed from about $485 billion in January to about $730 billion by July.
- [16]
Alphabet's free cash flow turned negative at $5.9 billion in the June quarter due to a rising bill for its AI.
- [17]
Alphabet lifted its 2026 forecast for capital spending to $195 billion to $205 billion.
- [18]
Chipmaker growth falling from 158% to 136% is a 22-point drop, about one-seventh of the prior rate, against a one-third speed loss in Raich's 150-to-100 mph analogy.
- [19]
The blended third-quarter estimate rose 6.2 points from Jan. 1 to April 1, 6.3 points from April 1 to July 1, and 3.0 points from July 1 to Oct. 9, about half the earlier pace.
- [20]
At 136%, chipmaker earnings growth is about 4.4 times the index's blended 30.6%.
- [21]
The index's growth falls 23.1 points from Q2 to Q3; about 18.7 points of that is the gap between Q2's 53.7% headline and its roughly 35% ex-stake-gains rate, leaving about 4.4 points of underlying deceleration.
- [22]
Planned capital spending at the five companies rose by about $245 billion between January and July, an increase of about 50%.
- [23]
Samsung's operating profit guidance was about 1.3 trillion won, or 1.2%, above analysts' expectations.
- [24]
If tech plus Alphabet, Amazon and Meta account for two-thirds of the gain, the rest of the index supplies about 10 points of the 30.6% blended growth.
- [25]
Blended earnings growth of 30.6% is about 2.6 times blended revenue growth of 11.8%, implying widening margins.
- [26]
The scorecard's path takes index earnings growth from 30.6% in Q3 to 19.8% in Q1 2027, a drop of 10.8 points.
- [27]
The blended third-quarter estimate roughly doubled from 15.1% on Jan. 1 to 30.6% on Oct. 9.
- [28]
Investors have been demanding that Big Tech turn its spending into returns.
Sources
1 independent publisher whose own reporting we read for this story.
- cryptopolitan.comS&P 500 profits seen up 31% as US chipmaker earnings growth slows from 158%
1 article · October 9, 2026
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