S&P 500 per-share earnings rise 53% in Q2 as consumer spending and tariff refunds lift profits

Nearly twice as many firms raised profit guidance as lowered it

S&P 500 per-share earnings rose 53% in the second quarter from a year earlier, while sales climbed nearly 16%, according to data from LSEG. The Wall Street Journal, in a Monday report drawing on company filings and conference calls, attributed the surge to a confluence of forces: rapid growth in AI spending, federal spending, refunds of some of their past tariff payments, and a booming stock market supporting continued consumer purchases. Investment gains at Amazon and Alphabet helped drive the headline figure; even excluding those one-time items, S&P 500 earnings rose by the largest amount since the fall of 2021.

Tariff refunds are providing a sizable, temporary tailwind. In a mid-August estimate, Apollo Global Management calculated that the refunds are likely to account for more than 4% of third-quarter economic growth—equivalent to about 0.2 percentage points on the Atlanta Fed’s growth forecast of between 4% and 5%.

At Abercrombie & Fitch, the fashion retailer told investors on a recent conference call that it expected around $120 million in tariff refunds, a sum that helped push the company to raise its full-year estimates. Customers continued to buy even as the company pared back discounts in the most recent quarter, according to Chief Financial Officer Robert Ball. “The underlying business performed above our expectations,” Ball said.

At Garmin, the fitness-watch maker, $21 million in tariff refunds lifted profit margins in the quarter ending in late July, executives said. Strong demand for the company’s fitness products also helped, prompting it to raise full-year guidance. Even without the refund, Chief Executive Clifton Pemble told investors, “our gross margin performance was impressive by any historical comparison.”

Healthcare distributor McKesson, lab-services provider Charles River Laboratories International, food giant J.M. Smucker and farm-equipment maker Deere were among the other companies that raised their full-year financial estimates. At many of them, the Journal reported, the tariff refunds flowed primarily to the bottom line rather than into lower prices for shoppers.

Some retailers said they passed at least part of their refunds along to consumers. Dollar General, which caters to cash-strapped shoppers through its mostly rural store base, posted a fifth consecutive quarter of higher traffic and a 3.5% increase in comparable sales, with executives saying they used part of their tariff refunds to lower prices. “Our core customers continue to be financially constrained,” Chief Executive Todd Vasos said on a conference call.

Walmart applied its own refunds to price cuts. Executives said the company received roughly $2.9 billion in tariff refunds, with some of the money used to lower prices in a bid to boost later-year sales. Yet comparable sales—those from stores and digital channels open at least a year—rose at their slowest pace in more than six years. Walmart still raised its full-year estimates earlier this month, with Chief Financial Officer John David Rainey describing the environment as “arguably a softer consumer environment than in February.”

Best Buy reported that shoppers were buying computers, televisions and AI-enabled glasses, lifting its most recent quarterly sales and profit. Target posted higher sales and profit and reported a tariff-refund benefit in the most recent quarter, noting shoppers pushed up purchases of toys, food and beauty products. Gap said its quarterly sales fell, hampered by performance at its Old Navy and Athleta brands even as its flagship Gap brand did well; the company still raised its full-year earnings estimates.

The strong quarterly results run counter to some recent economic indicators. Government retail-sales data for July showed overall softening, partly because Amazon and other retailers moved online summer sales to June this year from July last year. The Conference Board said this past week that its widely watched measure of consumer confidence slipped in August as consumers fretted about future economic conditions.

Torsten Slok, Apollo’s chief economist, said there are so far few signs that the factors driving growth will wane in the near future. “As long as the AI boom continues and the stock market continues to be elevated, and we continue to have strong consumer income growth, the consumer will continue to be in good shape,” Slok said. But if the AI spending fails to justify the investment, he added, “we will be having a different conversation.”