Deutsche Bank optimistic about U.S. stock market year-end: Q3 earnings growth expected to stay at 34%, AI and cyclical growth remain strong

According to a report from Zhitong Finance APP, Deutsche Bank has released a Q3 2026 US stock earnings preview, stating that the multiple tailwinds which drove S&P 500 earnings growth to a record 34% in Q2 remain strong in Q3. The bank expects the Q3 growth rate to remain at 34%, indicating that there will be no slowdown in earnings growth.

By comparison, the market consensus expects Q3 growth at 26.7%, implying a 7.5 percentage point slowdown from Q2. Deutsche Bank’s forecast is about 6 percentage points above consensus, whereas the historical average earnings season outperformance is only 3.3%. The bank believes this season will once again see above-average outperformance.

Three Main Tailwinds Drive Growth

Deutsche Bank points out that the earnings boom is driven by three major tailwinds acting together: accelerating AI demand, with year-on-year growth reaching 54%, contributing 20 percentage points to overall growth; a cyclical rebound, with an ex-technology, ex-energy and ex-materials growth rate of 14%, contributing 8 percentage points; and higher oil and commodity prices, driving the energy and materials sectors’ earnings up by 108%, contributing 7 percentage points.

It should be noted that the 34% growth rate is already adjusted, excluding one-off items such as Alphabet’s asset sale gains and Amazon’s unrealized investment gains. The unadjusted growth rate is as high as 53%.

Three Key Differences Between Deutsche Bank and the Market

No Signs of Slowing AI Demand

Addressing market concerns about whether AI demand can be sustained, Deutsche Bank believes multiple indicators show that Q3 AI demand growth remains very strong. For instance, the year-on-year growth of South Korean semiconductor production and exports accelerated further from Q2 to Q3, and persistent increases in GPU rental prices indicate ongoing tight supply and demand.

South Korean Semiconductor Export Growth Rises

The bank expects that AI demand will drive mega-cap growth stocks and the technology sector to maintain a high earnings growth rate of 54% in Q3. With their rising weight in S&P 500 earnings, their contribution to overall growth will rise from 19.5 percentage points in Q2 to 21 percentage points in Q3.

Cyclical Growth Accelerates Further

Deutsche Bank notes that various indicators show cyclical growth strengthening further in Q3. The US ISM Manufacturing Index surged in Q3 to its highest level in four and a half years, and this indicator has historically been the best cyclical leading indicator for S&P 500 earnings growth.

US ISM Manufacturing Index Rises

Consensus macro forecasts show US GDP growth accelerating from 2.2% in Q2 to 2.8% in Q3 (annualized quarter-over-quarter rate), while the Atlanta Fed’s tracking estimate is as high as 3.7%. In addition, retail sales, industrial production, and capital goods shipments growth remain robust, and cyclical employment has also continued to recover since bottoming out in February.

Limited Lagged Impact from Oil Prices, Tariff Refunds Add Further Support

On the lagged negative impact of high oil prices, Deutsche Bank believes it remains moderate and concentrated in specific sectors. The report states that historically, oil price shocks impact S&P 500 earnings in other sectors with a 2-to-3 quarter lag and the magnitude is usually moderate, as most companies cope by raising prices and increasing productivity.

Aviation, auto, and some consumer sectors are impacted faster and more severely, but earnings forecasts for these sectors have been substantially revised down since the outbreak of the Iran war: aviation by 17%, autos and packaging each by 9%, and non-aviation travel by 6%. In addition, following the Supreme Court’s ruling that invalidated IEEPA tariffs, companies continue to receive tariff refunds, which the bank expects will, as in Q2, contribute about 2 percentage points to overall Q3 earnings growth.

Earnings Season Plus Midterms, Favorable Year-End Risk-Reward

Deutsche Bank emphasizes that earnings season has historically been positive for equities. Since the financial crisis, the S&P 500 has risen in three-quarters of all earnings seasons, with an average gain of 2%. Over the past year, this pattern has become even more pronounced. Although this season coincides with the late October FOMC meeting and the early November US midterm elections—potential sources of added volatility—historical patterns show that markets typically go sideways or weaken ahead of major risk events, but rebound once the uncertainty is resolved.

The bank also notes that Q4 risk-reward in midterm election years has historically been very favorable: in 21 of the past 23 election years, the S&P 500 has risen in Q4, with an average gain of 7%. Overall, the bank believes the current US stock market risk-reward remains attractive.