Barclays has lifted its year-end 2026 price objective for the S&P 500 to 7,950 from 7,800 while maintaining its 2027 target at 8,800, citing a robust second-quarter earnings season where technology companies were the primary drivers of strength.
The investment bank also raised its fiscal 2026 (FY26) earnings-per-share estimate to $365 from $337 and increased its FY27 estimate to $414 from $389. The base case reflected in these figures assumes 30.8% EPS growth for 2026 and applies a price-to-earnings multiple of 21.8 times.
Those revisions follow a quarter in which S&P 500 headline EPS expanded by more than 50% year-over-year, or 29.3% when excluding one-time items, alongside sales growth of 13.3%. Big Tech was a key contributor, reporting 35% EPS growth compared with 30% in the prior quarter, while the remainder of the technology sector posted 88% EPS growth.
Strategists led by Venu Krishna observed that 86.2% of companies reported earnings above consensus estimates, a level above the 75% long-run median dating to 1998. However, they noted that "markets still penalized misses much more heavily than they rewarded beats this quarter," pointing to a high hurdle given elevated and rising yields.
Drivers within technology and hyperscaler capex
Within Big Tech, Barclays identified Alphabet and Amazon as the main sources of upside surprise in the quarter, while Meta failed to meet expectations. The bank expects hyperscaler capital expenditures to surpass $1.1 trillion in 2027, representing a 67% year-over-year increase, and sees Alphabet and Amazon as the largest contributors to that rise, with Meta close behind.
Despite the stronger earnings outlook, Barclays emphasized that its valuation assumptions remain "deliberately conservative." Using a sum-of-the-parts approach for 2026, the strategists attach a 23.0x multiple to Big Tech, 22.0x to the rest of the technology sector, and 21.0x to the remainder of the index. Barclays stated that under these assumptions, earnings growth does most of the work in raising its S&P 500 target.
Scenario ranges and sector positioning
Barclays' 2026 bull and bear scenarios are set at 8,350 and 6,750, respectively, while the bank's 2027 bull and bear cases are 9,800 and 7,800. In terms of sector recommendations, Barclays downgraded Utilities to Neutral from Positive, citing regulatory headwinds such as a lack of progress on wildfire liability reform in California and bipartisan resistance to data center permitting in several U.S. states.
The bank retained a Positive stance on Technology, Media, and Telecommunications (TMT) and Industrials, expressed a Negative view on the Consumer complex, and kept Neutral ratings on the remaining sectors.
Implications for markets
Barclays' revisions reflect an earnings-driven case for higher index targets, supported chiefly by technology sector outperformance and expanding hyperscaler spending. At the same time, the strategists' conservative multiples and attention to elevated yields underscore an emphasis on earnings durability rather than valuation expansion alone.
Investors and sector analysts should note the bank's changed stance on Utilities tied to specific regulatory developments and its continued optimism for TMT and Industrials amid ongoing capital investment by major cloud and platform providers.