U.S. corporate earnings growth remains strong, but the era of acceleration has come to an end. As the third-quarter earnings season draws to a close, signs such as slowing growth, narrower-than-expected declines, and more conservative performance forecasts are emerging simultaneously, cracks are beginning to appear in the core narrative that supported the U.S. stock market bull run.

Goldman Sachs David Kostin hit the nail on the head: "The third-quarter financial report highlights the fundamental challenge faced by stock investors: earnings growth is still strong, but it is no longer accelerating." He pointed out that the trend of accelerating earnings growth seen in several consecutive quarters is coming to an end.

At the same time, Goldman Sachs Tony Pasquariello stated that the third-quarter financial report will ultimately be remembered by the market as "disappointing"—especially against the backdrop of no clear slowdown in massive cloud computing capital expenditures, while several tech giants have experienced performance gaps in their core businesses.

The market's reaction speaks for itself. Good news hardly causes a ripple, while bad news is met with fierce backlash. The forward price-earnings ratio of the S&P 500 has fallen back to 18.4 times, indicating that the market is clearly beginning to worry about tomorrow, rather than celebrating yesterday's achievements.

Accelerating the end of an era, the direction of growth is difficult to beautify

At the data level, a clear slowdown is evident. According to FactSet data, the revenue growth rate of the median companies in the S&P 500 decreased from 7.4% in the first quarter to 7.2% in the second quarter, and then further to 7.0% in the third quarter. The market generally expects this trend to slow down further to 6.4% in the fourth quarter.

This is not a cliff-like decline, but the direction itself is increasingly difficult to interpret as an optimistic signal by the market. The slope of growth is turning around, rather than accelerating – for a stock market that prices based on profit momentum, the significance of this shift cannot be underestimated.

Machines that exceeded expectations are still in operation, but the output is declining.

American companies are still exceeding analysts' expectations, but the extent of these exceedances is not what it used to be. According to Goldman Sachs data, the cumulative earnings per share in the third quarter fell significantly below the high levels seen in the first and second quarters.

The "outperforming machine" has not stopped operating, but it is producing increasingly smaller surprises. Over the past few quarters, outperforming expectations has itself been an important catalyst for rising stock prices, yet the power of this engine is beginning to wane.

Weakening revenue guidance, and the resilience of profits fails to conceal underlying concerns

Research on Jefferies reveals a more concerning trend: the revenue guidance for 2026 has clearly shifted towards the negative, while the earnings per share revision remains strong for now.

"We have observed that the revenue guidance for 2026 has significantly shifted towards being less optimistic overall," Jefferies noted.

This means that companies are maintaining their profit performance through cost control and other measures, rather than relying on real expansion in revenue. For bulls, the temporary preservation of profits is somewhat reassuring, but a profit resilience that is not supported by revenue growth momentum is not a strong reason to continue to be bullish.

Asymmetry in market rewards and punishments hits large tech stocks the hardest

One of the most prominent market characteristics of this current financial reporting season is the extreme asymmetry in treatment between companies that exceed expectations and those that fall short. According to Jefferies data, companies whose performance exceeds expectations hardly receive any reward in terms of stock prices, while those whose performance falls short are severely penalized by the market—this is especially true for large tech stocks.

This signal in itself is thought-provoking: when good news can no longer drive stock prices, while bad news triggers a sharp decline, it indicates that the market's risk appetite is quietly tightening.

Prospects receive more attention than reality; ultra-large-scale cloud computing becomes a focal point of controversy

Goldman Sachs Tony Pasquariello pointed out the core contradiction of this quarter: despite no clear slowdown in capital expenditure, the core businesses of several ultra-large-scale cloud computing platforms still performed below expectations:

"Although a few cloud services have still achieved high compound growth on a large base, the third-quarter financial reports will ultimately be remembered as disappointing. Beyond the endless debates surrounding return on capital, capital expenditure, and free cash flow, in my view, this is the most critical issue at present: while the intention to continue large-scale cloud computing capital expenditure has not slowed down, several major players have made mistakes in certain areas of their core businesses."

Jefferies also emphasizes that what truly dominates market sentiment is no longer the disclosed historical data, but rather the increasingly cautious forward-looking guidance. The forward price-earnings ratio of the S&P 500 index has fallen to 18.4 times, confirming a shift in the market's pricing focus—investors are beginning to reprice for an uncertain tomorrow, rather than paying a premium for a strong yesterday.