UBS Sees 28% Q3 S&P 500 Earnings Growth on AI, Cyclicals

UBS told clients on 13 October 2026 that it expects S&P 500 companies to report earnings per share growth of about 28% for the September quarter, a call that lands after the Philadelphia Semiconductor Index fell almost 3% in a technology-led selloff. The bank argues AI spending, firmer cyclical demand and resilient consumers outweigh high energy prices, and it sees scope for US equities to move higher through the season. The forecast sets up chipmakers and hyperscalers as the main test of the bullish view.

Context — why the 28% earnings call matters now

UBS's estimate lands at an awkward moment. Technology shares led US stocks lower to start the week as investors waited on inflation data and earnings, with elevated oil prices and geopolitical conflict also weighing on sentiment. The bank is effectively asking investors to look through that tape.

The comparable UBS itself supplies is its June-quarter read. Hyperscaler cloud revenue grew just under 50% year on year in that period, and the bank now expects close to 60% in the September quarter. That acceleration is the clearest evidence in the call that AI demand is still compounding rather than fading.

AI-related spending is estimated to rise more than 80% this year to around $900 billion. UBS expects semiconductors alone to deliver about half of S&P 500 earnings growth in the quarter, which is why the chip complex carries outsized weight in the forecast.

The macro backdrop is the complication. The 10-year Treasury yield has climbed by more than one percentage point this year, and oil prices remain elevated. Both are traditional brakes on equity multiples, particularly for long-duration technology names.

What changed to trigger the call is the breadth of the profit story. UBS no longer frames the quarter as an AI-only event. The new orders component of the ISM manufacturing index has stayed in expansion for nine straight months, and the bank notes such stretches have historically lasted about three years on average.

Data — what the numbers show

The headline figure is 28% EPS growth for S&P 500 companies in the September quarter. Underneath it, UBS puts AI-related spending at more than 80% growth this year to roughly $900 billion, with semiconductors contributing about half of index earnings growth.

Hyperscaler cloud revenue is the second pillar. UBS sees close to 60% year-on-year growth in the quarter, against just under 50% in the June quarter — a step up of roughly ten percentage points.

The cyclical leg rests on manufacturing. Nine consecutive months of expansion in ISM new orders is the longest stretch UBS cites, and the historical average duration of about three years implies the run is not yet extended by its own standard.

Metric	June quarter	September quarter (UBS estimate)
Hyperscaler cloud revenue growth	Just under 50% y/y	Close to 60% y/y
S&P 500 EPS growth	Not given	Around 28%
Semiconductor share of index EPS growth	Not given	About half

On the consumer side, initial jobless claims sit near multi-decade lows, which UBS uses to argue labour market strength will prevent a meaningful slowdown in overall spending even as energy costs squeeze lower-income households.

For balance sheets, the 10-year Treasury yield has risen more than one percentage point this year, yet non-financial S&P 500 companies carry a weighted average debt maturity of about 11 years. Little of that debt resets to higher rates in the near term.

Analysis — what it means for markets and sectors

The sector read inside the UBS call is a split decision. Industrials and AI-linked names sit on the favoured side, supported by the ISM new-orders run and the semiconductor earnings contribution. Freight-exposed retailers, goods manufacturers and travel firms sit on the other side, where higher energy costs bite hardest.

The second-order effect runs through input costs. Manufacturers facing higher energy prices may see input costs rise, and travel-related companies are already feeling the impact, according to UBS. Those are margin stories rather than revenue stories, which is why the bank still sees only a limited hit to aggregate index profits.

The limitation in the view is oil. A further spike tied to Gulf escalation would widen the margin squeeze for goods sellers and test the assumption that the hit to overall profits stays limited. UBS acknowledges the headwind but does not model a sustained escalation.

Positioning follows the same logic. Money has been rotating toward AI infrastructure and cyclical manufacturers and away from freight-heavy retail and travel. The chip-led selling earlier this week suggests some investors are taking profits ahead of prints rather than abandoning the AI thesis.

Outlook — what to watch next

Today's US CPI report is the near-term hurdle. A hot core reading would push yields higher and weigh on richly valued technology names, directly challenging the multiple that supports UBS's 28% earnings figure.

The second catalyst is the earnings calendar itself. Results from chipmakers and hyperscalers later this week are the main test of the bullish view, since semiconductors are expected to deliver around half of index earnings growth.

Oil is the third variable. UBS's base case assumes the profit hit from energy costs stays contained, and any move that breaks that assumption would pressure the freight-exposed retailers, goods makers and travel names the bank already flags as vulnerable.

On yields, the reference point is the 10-year Treasury, which has risen more than one percentage point this year. UBS expects volatility to persist but sees scope for stocks to move higher on strong profit growth.

Frequently Asked Questions

What does UBS's 28% S&P 500 earnings forecast mean for retail investors?

It means the profit backdrop UBS models is strong enough to offset two known headwinds: elevated oil and rising yields. For index-level investors, the implication is that earnings, not multiple expansion, would drive returns. The risk is concentration — with semiconductors delivering about half of index earnings growth, broad index exposure is effectively a large bet on chip demand holding up through the quarter.

Why are semiconductors so important to this quarter's S&P 500 earnings?

UBS expects chipmakers to contribute roughly half of S&P 500 earnings growth in the September quarter, against AI-related spending rising more than 80% this year to around $900 billion. That concentration means a miss from a single large chipmaker or hyperscaler would move the index figure materially. It also explains why the Philadelphia Semiconductor Index's near-3% drop this week mattered to sentiment.

How exposed are S&P 500 companies to rising Treasury yields?

Less than the headline yield move suggests, according to UBS. The 10-year Treasury yield has climbed more than one percentage point this year, but non-financial S&P 500 companies have a weighted average debt maturity of about 11 years. That means only a small slice of corporate debt is resetting to higher rates in the near term, which limits the refinancing risk from the yield move.

Bottom Line

UBS's 28% call hinges on chips and AI spending, with oil and today's CPI the two variables that could break it.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.