Wall Street is optimistic by default, but this forecast is stretching the optimism meter. Consensus estimates now call for S&P 500 net profit margins to hit 13.9% in 2026, according to FactSet, the highest level since the firm began tracking the data in 2008.
Lucky 13 Gets Even Luckier
If those numbers hold, next year would mark an all-time high for annual net profit margins. FactSet’s John Butters notes that markets have never priced in margins this rich before, and Barron’s recently flagged just how aggressive those assumptions look compared with history.
RBC Capital Markets’ Lori Calvasina put it more bluntly, telling Barron’s that we are entering a “golden age of margins.” That is a powerful phrase, especially in a market already sitting near record highs.
Tech Is Carrying the Math
The big question is where all this profitability is supposed to come from. The answer, unsurprisingly, is technology. Forecasts assume large tech companies will continue squeezing more earnings out of revenue through AI-driven efficiency, pricing power, and scale, even if the exact mechanics are a bit fuzzy.
Barron’s summed it up neatly by calling it “benefits from AI, pricing power, or whatever,” which is not exactly a spreadsheet-level explanation. Still, history suggests betting against big tech’s ability to expand margins has been a losing trade for decades.
Optimism With a Side of Faith
For investors, higher margins mean higher earnings without needing explosive revenue growth, which is why markets are so willing to believe this story. At the same time, expectations are now set extraordinarily high, leaving less room for disappointment if costs creep up or growth slows.
Whether this really is a golden age or just peak optimism will depend on whether tech can keep turning efficiency narratives into real dollars. So far, Wall Street is more than willing to give them the benefit of the doubt.