Deutsche Bank released its outlook for the third-quarter financial reporting season on Wednesday this week, predicting that earnings of S&P 500 companies will increase by 34.1% year-on-year, nearly matching the adjusted 34.2% seen in the second quarter. The market consensus cited in the report is 26.7%, representing a difference of 7.4 percentage points between the two forecasts.

26.7% itself is already at a historical high. Deutsche Bank pointed out that, excluding the period of profit recovery after a recession, this is the highest consensus growth expectation in the market before the start of each financial reporting season. The real disagreement between Deutsche Bank and the market lies in how much the profit growth rate will slow down.

This divergence is mainly concentrated in two groups of companies: the financial industry, and Deutsche Bank's classification of large growth stocks and technology stocks, namely “MCG & Tech”. The demand for AI, the performance of cyclical businesses, and energy prices constitute the main basis for Deutsche Bank to maintain its higher profit forecasts.

The financial sector is one of the areas where there is the largest discrepancy between Deutsche Bank's forecasts and market predictions. Deutsche Bank expects the financial sector's profits to grow by 10.4% year-on-year in the third quarter, while the market consensus is only 1.3%. Both forecasts are significantly lower than the 23% growth seen in the second quarter, but there is a 9.1 percentage point difference in the assessment of the extent of the profit slowdown.

Deutsche Bank believes that indicators such as manufacturing, retail, and capital goods shipments still support cyclical profit growth. Based on this assessment, the profit resilience of cyclical industries such as finance may be higher than what analysts currently incorporate into their models.

Larger profit increments came from large growth stocks and technology companies. The " MCG & Tech " combination in Deutsche Bank's report expects a 55.2% increase in profits for the third quarter, which is higher than the market consensus of 45.9%.

This combination is not equivalent to the S&P 500 Information Technology sector; rather, it spans multiple industries, including companies such as Amazon ( AMZN.O ), Visa ( V.N ), etc. Deutsche Bank links its profitability to indicators such as semiconductor demand and GPU rental prices.

As the weight of these companies in S&P 500 earnings continues to increase, Deutsche Bank estimates that their contribution to the overall earnings growth rate of the index will rise from 19.5 percentage points in the second quarter to about 21 percentage points in the third quarter.

There are also forecast discrepancies in other cyclical industries. Deutsche Bank expects earnings growth of 10.1% for consumer cyclic stocks, while the market consensus is 3.8%; forecasts for industrial cyclic stocks are 35.0% and 32.7% respectively.

The high growth rate of the industrial sector is affected by the base effect, which includes Boeing's ($BA.N) substantial losses in the same period last year as well as changes in the index composition. Excluding the base effect of Boeing, Deutsche Bank expects the earnings of industrial cycle stocks to grow by about 15% in the third quarter.

When comparing the profit data of two quarters, accounting adjustments also need to be taken into consideration. The 34.2% growth rate for the second quarter adopted by Deutsche Bank already excludes the income from the sale of Alphabet ( GOOGL.O ) assets and the unrealized gains from Amazon investments, and it also includes the intellectual property research and development expenses incurred from a merger with Gilead.

If these adjustments are not made, the year-over-year growth in earnings for the S&P 500 in the second quarter would reach 53%. Therefore, when Deutsche Bank speaks of a basically stable earnings growth rate in the third quarter, it is referring to an adjusted figure of 34.2% as the benchmark for comparison.

Goldman Sachs released its third-quarter earnings forecast last Friday, which also indicated that AI is significantly boosting the profit growth rate at the index level. The report uses earnings per share (EPS) as a metric and listed a consensus market growth rate of 27% for the third quarter.

Goldman Sachs estimates that companies that benefit from AI infrastructure spending will contribute more than half of the increase in earnings per share for the S&P 500 in the third quarter. Among them, the top ten companies account for a total of 68% of the entire EPS increase.

AI Capital expenditure is still accelerating. According to market consensus cited by Goldman Sachs, capital expenditure by hyperscalable cloud computing companies is expected to increase by 116% year-on-year in the third quarter, significantly higher than the 87% in the second quarter.

At the same time, Goldman Sachs analysts expect that the growth rate of cloud business revenue for related companies will increase from 48% to 55%. This indicator can further reflect the speed at which substantial AI investments are converted into revenue growth.

However, high growth at the index level does not mean that most companies are in a similar state. Goldman Sachs expects that the median growth rate of the S&P 500 components EPS will decline from 14% in the second quarter to 9% in the third quarter.

Therefore, there is a significant gap between the overall index profit growth of 27% and the median of 9% for its constituent stocks. Goldman Sachs expects that the pressure of input costs will limit the expansion of corporate profit margins on a quarter-on-quarter basis, and the boost to revenue growth from a weaker dollar will also be less than in the previous quarter.

Earnings expectations among different sectors have also diverged rapidly. According to data cited by CNBC on Wednesday this week, which comes from FactSet, since the end of June, the third-quarter earnings forecasts for the eight S&P 500 sectors have been lowered.

Among them, the profit forecasts for the materials, essential consumer goods, and healthcare sectors were lowered by 10.2%, 4%, and 3.3%, respectively. During the same period, the forecasted growth rate for the technology sector EPS was raised from 57% to 65%.

At present, there is still a lack of widespread quantitative disclosure regarding the contribution of AI to corporate actual profits. According to Goldman Sachs' statistics, in the last quarter, about half of the companies on the S&P 500 mentioned AI and productivity or efficiency during their financial report conference calls, but only 2% of these companies quantified the related impact on earnings.

Apart from AI and cyclical industries, energy prices are another factor supporting Deutsche Bank's high profit forecasts. The bank expects energy sector profits to grow by 128.5% year-on-year in the third quarter, while the materials sector is expected to see a growth of 38.1%, both exceeding market consensus of 122.6% and 34.5% respectively.

The growth rates of both sectors were lower than in the second quarter. Deutsche Bank expects that the combined contribution of the energy and materials industries to the overall earnings growth of the S&P 500 will decline from 6.8 percentage points in the second quarter to 5.6 percentage points in the third quarter, reflecting a slowdown in commodity price increases.

The impact of rising energy prices varies across different industries. Deutsche Bank believes that the pressure of energy costs on the profits of most industries usually takes two to three quarters to fully manifest, while the impact on aviation, automotive, and some consumer industries is more immediate.

Since the start of the Iran war, Deutsche Bank's profit forecasts for the aviation industry have been lowered by 17%, and those for the automotive industry by 9%. This means that the profit support obtained by energy companies will also put pressure on other industries through the cost side.

Tariff refunds constitute another source of profit. Deutsche Bank estimates that this factor contributed about 2 percentage points to the earnings growth of the S&P 500 in the second quarter and may continue to contribute a similar amount in the third quarter.

Deutsche Bank, citing data from the US Treasury Department, stated that the amount of refunds in the third quarter reached $69 billion. However, this figure covers a wider range of companies than the S&P 500, therefore not all of the $69 billion can be attributed to the profits of S&P 500 companies.

Goldman Sachs also reported a refund amount of $69 billion for the third quarter. According to their calculations, this amount is approximately equivalent to 6% of the pre-tax profits of all U.S. corporations. Since this ratio uses the pre-tax profits of all corporations as the denominator, it is not on the same footing as Deutsche Bank's estimate of the contribution to the earnings growth of the S&P 500.

Goldman Sachs also expects that the impact of "other income" generated from the appreciation of equity investments in large technology companies on the third-quarter financial results will be less significant than in the previous quarter.

The time to truly test these predictions is approaching. According to the financial report schedule compiled by Goldman Sachs last Friday, by the end of October, it is expected that approximately 70% of the companies in the S&P 500 will release their third-quarter results, with most of the large-scale cloud computing companies disclosing their figures in the last week of October.