Stocks Say No Recession: S&P 500 Earnings Crush Expectations

If you're convinced that record-high stock prices signal irrational valuations or that the U.S. economy is heading straight for a downturn, the latest corporate quarterly results might make you reconsider.

• VOO ETF is trading at record highs. Check live prices here.

U.S. corporations are delivering one of the strongest top-line beats in years, outpacing even Wall Street's most optimistic projections and challenging the narrative that stock valuations are dangerously stretched.

Corporate America Beat The Street In Q2 2025

According to FactSet, 81% of S&P 500 companies have reported revenues above analysts' forecasts in the second quarter, the highest rate since the second quarter of 2021's 87% and far above the 5-year average of 70%.

On aggregate, companies are beating revenue expectations by 2.4%, a figure unmatched since the first quarter of 2023 and well above the 10-year average of 1.4%.

The year-over-year revenue growth rate stands at 6.3%, the strongest since the third quarter of 2022, when it reached 11%. Ten out of 11 sectors posted gains, led by Information Technology, Health Care, and Communication Services. Energy remains the sole laggard, reporting a decline.

Earnings strength matched the revenue story. FactSet data shows 81% of S&P 500 companies exceeded earnings-per-share estimates, surpassing both the 5-year average of 78% and the 10-year average of 75%. This level hasn't been reached since the third quarter of 2023.

The forward 12-month price-to-earnings ratio is 22.1, up from the 5-year average of 19.9 and the 10-year average of 18.5, mirroring valuations recorded at the end of June.

Is This A Bubble?

While forward-looking price-to-earnings ratios are above historical norms and both the S&P 500 and Nasdaq 100 sit at record highs as of Aug. 12, underlying economic strength is holding the fort.

Market veteran Ed Yardeni said the U.S. economy has proven "resilient" despite the pandemic, supply-chain turmoil, inflation spikes, monetary tightening, and now tariffs.

He said high stock multiples can be justified if recession risks remain low.

“Furthermore, earnings would be the main driver of the bull market rather than even higher valuation multiples. That would be a most welcome development,” he said in a note this week.

Yardeni envisions an AI-driven "Roaring 2020s" in which productivity growth fuels real GDP gains while keeping inflation subdued.

In that scenario, he projects the S&P 500 could reach 10,000 by 2030.

The Vanguard S&P 500 ETF VOO is already up 9% in 2025 and has surged more than 33% since its April tariff-driven low.

Recession Talk Is Fading Fast

Despite market chatter about tariffs and slowing growth, recession fears are notably absent from corporate boardrooms.

According to FactSet data, only 16 S&P 500 earnings calls this quarter mentioned the word "recession," compared with a 5-year average of 74 and a 10-year average of 61.

That's an 87% drop from the first quarter 2025, when the term appeared on 124 calls. Overall, just 4% of the 442 calls held between June 15 and Aug. 7 cited recession.

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