Barclays raises S&P 500 year-end target to 7,950 on strong earnings

Barclays raised its year-end target for the S&P 500 to 7,950 from 7,800, betting that strong corporate earnings and continued artificial intelligence investment will keep supporting the US stock market.

The new target is about 3.6% above the index's latest close. Barclays also expects the benchmark to reach 8,800 by the end of 2027, underscoring the brokerage's longer-term confidence in corporate earnings despite several risks facing markets.

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Earnings give stocks room to run

The upgrade comes after a stronger-than-expected second-quarter earnings season, with technology companies leading the gains. Of the 492 S&P 500 companies that had reported results, 86% beat analysts' estimates, well above the long-term average of 67.5%, according to LSEG data cited by Reuters.

Barclays expects that earnings momentum to continue, helped by spending on AI and a healthy US economy. The brokerage raised its 2026 earnings-per-share forecast for the S&P 500 to $365 from $337.

The S&P 500 has already gained 12.1% this year, suggesting investors have largely looked past concerns around inflation, geopolitics and interest rates.

AI optimism meets valuation concerns

Barclays is bullish on earnings but remains cautious about how much investors should pay for them. The brokerage flagged questions over whether the current pace of AI spending can last, along with resilient inflation, geopolitical uncertainty and a more hawkish interest-rate outlook.

It also downgraded the utilities sector to "neutral" from "positive", pointing to regulatory uncertainty, including challenges around wildfire liability reform and growing opposition to data center permitting in some US states.

Barclays is not alone in expecting further gains. HSBC also raised its year-end S&P 500 target on Tuesday, citing strong corporate earnings and continued AI infrastructure spending.

UBS Global Research, Goldman Sachs and Citigroup are even more bullish, with all three expecting the index to finish the year at or above 8,000, according to Reuters.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)