AI Earnings Supercycle Widens as 95% of Countries Avoid Profit Contractions

TLDR:

• Only 5% of countries face forward EPS declines, the lowest share since 2021 as global profit breadth improves.
• MSCI World net income jumped 39.7% year over year as about 90% of companies reported second-quarter results.
• S&P 500 earnings rose 52%, while underlying profits climbed 33% after excluding AI-linked investment gains.
• STOXX 600 profits were set to rise 23.4%, with ex-energy earnings growth remaining strong at 12.3% in Q2.

Global earnings momentum is widening, with only about 5% of countries now expected to post year-over-year declines in forward earnings per share. That means roughly 95% are avoiding profit contractions, marking the strongest earnings breadth since 2021, according to Topdown Charts analysis using LSEG data.

The shift matters as the equity rally is no longer being supported only by a narrow group of technology leaders. Stronger profits are appearing across markets and sectors, while company results show that AI infrastructure remains a major, but not exclusive, earnings driver.

Global Profit Breadth Expands as 95% Avoid EPS Declines

The current breadth compares with strong earnings periods seen during 2004-2006 and 2010-2011. By contrast, more than 90% of countries faced falling earnings around the 2008 financial crisis and during the 2020 pandemic.

That reversal shows how broadly profit expectations have improved across markets. Around 90% of MSCI World companies had reported second-quarter results by Aug. 21, with aggregate net income rising 39.7% annually.

The reporting season also drew more capital into equities, reinforcing the improving earnings backdrop. Global equity funds attracted $22.01 billion during the week through Aug. 19, marking their strongest inflows in three weeks.

The United States remained a central engine of that expansion. S&P 500 second-quarter earnings increased about 52% year over year, partly supported by investment gains linked to AI companies.

Even after excluding those mark-to-market effects, however, underlying profit growth remained strong. Earnings still rose about 33%, representing the strongest underlying increase since 2021.

Moreover, the gains extended beyond technology. Seven of the S&P 500’s 11 sectors reported higher earnings, while AI infrastructure stocks generated roughly one-third of quarterly EPS growth.

Asia added another powerful contribution through semiconductors. South Korea’s chip industry produced a major earnings and tax windfall as AI memory demand boosted Samsung Electronics and SK Hynix.

Global Profit Growth Broadens Across the U.S., Europe and Asia

Europe also strengthened the global picture. STOXX 600 companies were expected to deliver 23.4% second-quarter profit growth by mid-August. Energy companies accounted for a significant share of that increase. Even so, earnings were still projected to rise 12.3% when energy was excluded.

Nearly 59% of reporting European companies also beat analyst expectations, reinforcing evidence that the global profit cycle is being supported by multiple industries rather than a single theme. As earnings strength broadened, equity performance also reflected the improving backdrop.

The iShares MSCI ACWI ETF posted a 13.62% year-to-date NAV return through Aug. 20. That advance followed several strong years for global equities, with official MSCI data showing ACWI gains of 22.87% in 2025, 18.02% in 2024 and 22.81% in 2023.

Source: MSCI

The index represents about 85% of the global investable equity market, making it a broad gauge of worldwide stock performance. However, the United States still accounts for 63.55% of its weight, while information technology represents another substantial concentration at 30.28%.

Despite those concentrations, the latest earnings data point to a wider foundation beneath global equities. Profit growth is extending across Europe and Asia, while energy, materials, financials, semiconductors and AI-linked infrastructure are also contributing.

Consequently, the current earnings cycle is showing unusually broad geographic and sector participation. With only 5% of countries facing forward EPS declines, profit contractions have become the exception rather than the prevailing global trend.

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