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5 Sector ETFs Likely to Win on Earnings Growth Potential
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Key Takeaways
S&P 500 earnings are projected to jump 21.2% in Q2, with 11 sectors posting growth.
Energy, Tech, Basic Materials, Utilities and Aerospace show strong earnings momentum.
AI demand, commodity strength and defense spending are boosting sector profit outlooks.
The earnings outlook for U.S. companies continues to be encouraging. During the latest reporting season, companies not only surpassed consensus earnings expectations by a comfortable margin but also offered reassuring assessments of the economy despite elevated energy costs and other headwinds. Earnings revisions have also trended higher, indicating improving profit expectations.
Strong Q2 Earnings Expectations
Total second-quarter earnings for the S&P 500 are currently projected to rise 21.2% from the year-ago period on revenue growth of 10.7%. Of the 16 Zacks sectors, 11 are expected to post positive earnings growth in the quarter, per Earnings Trends issued on June 3, 2026.
Estimates Continue to Move Higher
Since the start of April, earnings expectations for the second quarter have steadily improved. Current growth estimates of 21.2% are up from 18% at the beginning of the quarter. Upward revisions have been concentrated in five sectors: Technology, Energy, Basic Materials, Utilities and Business Services.
What Lies Ahead of 2026 As a Whole?
All 16 Zacks Sectors are expected to have positive earnings growth in 2026. Seven sectors are expected to achieve double-digit earnings growth in 2026 - Aerospace (+38.7%), Autos (+23.3%), Basic Materials (+49.6%), Industrial Products (+12.0%), Tech (+34.7%), Finance (+10.5%), and Oil/Energy (+62.4%), according to the same Earnings Trends report.
The information technology sector currently revolves around the AI boom and the AI boom is driven mainly by Magnificent Seven stocks. For the Mag 7 group, total 2026 earnings are expected to increase by +27.0% on +19.7% higher revenues, which would follow the group’s 2025 earnings growth of +24.8% on +15.5% higher revenues.
Total Tech sector earnings are expected to grow +42.0% in Q2 on +26.2% higher revenues, which follows earnings growth of +49.0% on 23.7% higher revenues in the preceding quarter (2026 Q1).
Energy – State Street Energy Select Sector SPDR ETF (XLE - Free Report)
A significant portion of the earnings upgrade momentum of the S&P 500 has come from the Energy sector this time around. Excluding Energy, aggregate second-quarter earnings estimates for the rest of the S&P 500 would have edged lower since early April. The Energy sector is expected to post 44.3% earnings growth in Q2 2026 on 14.3% higher revenues.
The aerospace sector is expected to post 10.8% earnings growth in Q2 2026 on 6.4% higher revenues. For the full year 2026, the sector is likely to post 38.7% earnings growth on 6.3% revenue expansion. The aerospace sector has been a clear winner from the ongoing geopolitical crisis and the demand for aerospace- and defense-related equipment and services.
Basic Materials – State Street Materials Select Sector SPDR ETF (XLB - Free Report)
The Basic Materials sector is expected to post 46.6% earnings growth in Q2 2026 on 14.0% higher revenues. For the full year 2026, the sector is likely to record 49.6% earnings growth on 18.7% revenue expansion. Basic materials stocks have been surging in 2026 due to a combination of higher commodity prices, strong infrastructure demand, AI-related investment and geopolitical disruptions.
Utilities – State Street Utilities Select Sector SPDR ETF (XLU - Free Report)
For the full year, the sector is expected to record 9.8% earnings growth on 3.9% revenue growth. For the second quarter of 2026, the sector is likely to log 14.5% earnings growth over 6.9% revenue expansion.
As a low-beta sector, utilities are relatively shielded from market volatility, making them a defensive investment and a safe haven during economic turmoil. Investors often turn to utilities during downturns due to the steady demand for these companies' services (read: Too Much Tech in Your Portfolio? ETFs to Help You Diversify).
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5 Sector ETFs Likely to Win on Earnings Growth Potential
Key Takeaways
The earnings outlook for U.S. companies continues to be encouraging. During the latest reporting season, companies not only surpassed consensus earnings expectations by a comfortable margin but also offered reassuring assessments of the economy despite elevated energy costs and other headwinds. Earnings revisions have also trended higher, indicating improving profit expectations.
Strong Q2 Earnings Expectations
Total second-quarter earnings for the S&P 500 are currently projected to rise 21.2% from the year-ago period on revenue growth of 10.7%. Of the 16 Zacks sectors, 11 are expected to post positive earnings growth in the quarter, per Earnings Trends issued on June 3, 2026.
Estimates Continue to Move Higher
Since the start of April, earnings expectations for the second quarter have steadily improved. Current growth estimates of 21.2% are up from 18% at the beginning of the quarter. Upward revisions have been concentrated in five sectors: Technology, Energy, Basic Materials, Utilities and Business Services.
What Lies Ahead of 2026 As a Whole?
All 16 Zacks Sectors are expected to have positive earnings growth in 2026. Seven sectors are expected to achieve double-digit earnings growth in 2026 - Aerospace (+38.7%), Autos (+23.3%), Basic Materials (+49.6%), Industrial Products (+12.0%), Tech (+34.7%), Finance (+10.5%), and Oil/Energy (+62.4%), according to the same Earnings Trends report.
Winning Sector ETFs in Focus
Information Technology – Roundhill Magnificent Seven ETF (MAGS - Free Report)
The information technology sector currently revolves around the AI boom and the AI boom is driven mainly by Magnificent Seven stocks. For the Mag 7 group, total 2026 earnings are expected to increase by +27.0% on +19.7% higher revenues, which would follow the group’s 2025 earnings growth of +24.8% on +15.5% higher revenues.
Total Tech sector earnings are expected to grow +42.0% in Q2 on +26.2% higher revenues, which follows earnings growth of +49.0% on 23.7% higher revenues in the preceding quarter (2026 Q1).
Energy – State Street Energy Select Sector SPDR ETF (XLE - Free Report)
A significant portion of the earnings upgrade momentum of the S&P 500 has come from the Energy sector this time around. Excluding Energy, aggregate second-quarter earnings estimates for the rest of the S&P 500 would have edged lower since early April. The Energy sector is expected to post 44.3% earnings growth in Q2 2026 on 14.3% higher revenues.
Aerospace – iShares U.S. Aerospace & Defense ETF (ITA - Free Report)
The aerospace sector is expected to post 10.8% earnings growth in Q2 2026 on 6.4% higher revenues. For the full year 2026, the sector is likely to post 38.7% earnings growth on 6.3% revenue expansion. The aerospace sector has been a clear winner from the ongoing geopolitical crisis and the demand for aerospace- and defense-related equipment and services.
Basic Materials – State Street Materials Select Sector SPDR ETF (XLB - Free Report)
The Basic Materials sector is expected to post 46.6% earnings growth in Q2 2026 on 14.0% higher revenues. For the full year 2026, the sector is likely to record 49.6% earnings growth on 18.7% revenue expansion. Basic materials stocks have been surging in 2026 due to a combination of higher commodity prices, strong infrastructure demand, AI-related investment and geopolitical disruptions.
Utilities – State Street Utilities Select Sector SPDR ETF (XLU - Free Report)
For the full year, the sector is expected to record 9.8% earnings growth on 3.9% revenue growth. For the second quarter of 2026, the sector is likely to log 14.5% earnings growth over 6.9% revenue expansion.
As a low-beta sector, utilities are relatively shielded from market volatility, making them a defensive investment and a safe haven during economic turmoil. Investors often turn to utilities during downturns due to the steady demand for these companies' services (read: Too Much Tech in Your Portfolio? ETFs to Help You Diversify).