economy
These charts show why stocks keep rallying. Profit margins are the highest on record
Recent FactSet data show that the rise in earnings is not coming from sales growth alone.
TL;DR
- S&P 500's blended net profit margin hit a record 16.9% in the second quarter.
- This margin is significantly higher than the first quarter (14.8%) and a year ago (12.9%), surpassing the five-year average of 12.4%.
- Alphabet and Amazon are the primary drivers of this record margin.
- Even excluding Alphabet and Amazon, the S&P 500 margin remains a record at 15%.
- Eight out of 11 S&P 500 sectors reported higher margins year-over-year, led by technology, communication services, consumer discretionary, and energy.
- Strong demand and operating leverage are enabling companies to convert more revenue into profit.
- Technology companies benefit from business models that scale efficiently, though competitive pressure poses a potential future risk to their margins.