S&P 500 companies posted 31% year-on-year net income growth in the second quarter, beating an earlier 23% forecast and marking the strongest increase since 1992 outside rebounds that followed recessions. The index has since reached its 27th all-time high, helped by robust earnings and easing inflation pressures that have reinforced the case for equities. Profit margins, which had struggled to rise above 14%, approached 16% as AI began shifting from a cost center to a profit driver, helping fuel what strategists described as an earnings-led rally rather than valuation expansion. Because earnings have risen faster than share prices, the S&P 500's price-to-earnings ratio has fallen from about 26 at the start of the year to below 22, completing a valuation reset. The earnings recovery is also widening beyond the largest technology names: about three-quarters of U.S. companies that had reported results beat expectations on both earnings per share and revenue, while the surprise rate among small- and mid-cap stocks was near post-pandemic highs. Strategists have raised their forecast for full-year S&P 500 earnings growth to 27% from 15% at the start of the year and lifted the average year-end index target to 7,894, an unusually strong outlook outside typical post-recession recoveries. Outside the U.S., European companies' second-quarter net profit margin climbed to a record 12%, MSCI Europe earnings growth reached 18%, the strongest since 2022, and Asia Pacific earnings estimates have risen nearly 10% since June, the biggest increase for that period since 2009. Nvidia's upcoming results are seen as the last major test this month for the strength of the current earnings-driven bull market.