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Corporate America has never been this profitable

The S&P 500’s profit margin just hit a record high.

Hyunsoo Rim

AI is lifting almost everything in sight, from minting new millionaires at a historic pace to vaulting an entire country up the ranks of the worlds biggest stock markets. And with the US sitting at the center of that boom, Corporate America is squeezing more profit out of every dollar it brings in than ever before.

In the first quarter, S&P 500 companies kept nearly $0.15 of profit for every dollar of revenue, according to FactSet — the highest figure recorded since the data provider began tracking the metric in 2009, and more than double the long-run historical average of around $0.06 going back to 1946. 

Much of it comes down to the index’s new center of gravity: a handful of unusually profitable tech giants. The Magnificent 7 alone account for more than a third of the S&P 500’s market value, and they’re punching far above their weight on earnings, posting 63.2% earnings growth in Q1, nearly 4x the rate of the other 493 companies.

SPX profit
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Bloomberg data through June 4 shows the trend holding, with both operating and net profit margins at their highest in at least two decades — meaning companies are making more from their core businesses, as well as keeping more for shareholders after costs, interest, and taxes are paid.

Both measures have climbed sharply back from the depths of the 2008 financial crisis and the shock of Covid, with the latest leg ripping higher on strong AI demand, blockbuster megacap earnings, and years of sweeping layoffs and efficiency pushes that have become a staple of Big Tech earnings calls. 

Still, the profit boom comes with concentration risk. Goldman Sachs warned last week that AI infrastructure beneficiaries are expected to account for roughly half of all S&P 500 earnings growth this year — leaving more of the outlook riding on whether the massive AI build-out eventually translates into durable profits. 

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SpaceX gets a wave of bullish ratings from Wall Street analysts

SpaceX received more than a dozen positive analyst calls on Tuesday — including from major Wall Street banks — as they initiate coverage on Elon Musk’s space and AI company.

SpaceX went public on June 12 at a $2.2 trillion valuation, the largest debut in history. While the company hasn’t yet posted a profit, it seems to have convinced Wall Street that it will get there and grow its valuation on the way.

Of the at least 17 analysts that gave a rating on Tuesday, all but one gave it a “buy” or “outperform” rating. MoffettNathanson was "neutral."

The ratings come as SpaceX joined the Nasdaq 100 index, a benchmark tech-heavy basket of companies that underpins millions of portfolios. The inclusion adds built-in demand for the stock from index funds and ETFs.

Still, SpaceX fell more than 5% on Tuesday amid a broader sell-off, and is currently effectively flat from its opening price of $150 a share.

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Nike sinks to lowest level since 2014 after warning of “challenged” sales environment in Q4 report

Did Nike do it?

Investors had a mixed reaction after the global sports apparel company reported its fourth quarter earnings on Tuesday after the bell. Shares initially rose 5% as Nike beat out Wall Street expectations amid a hefty tariff refund bonus. However, the stock then sank to its lowest level since August 2014 in postmarket trading.

Here are the Q4 numbers:

  • Revenue of $11.0 billion (estimate: $10.8 billion).

  • Adjusted earnings per share of $0.20 (estimate: $0.12).

Ahead of this report, Nike warned that results would be flattered by a one-time tariff refund (now estimated at roughly $0.52 per share for the bottom line). That gave the company an extra cushion in snapping its streak of seven quarters of year-over-year profit declines.

Over the past year, the company had been punished by tariffs on imported goods, stagnant consumer spending, and increasing competition from other footwear brands like New Balance, Adidas, and Hoka.

Outgoing CFO Matthew Friend deemed it an “increasingly challenging operating environment, where sell-through remains challenged.”

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