The table below displays the current and historical trailing price-to-earnings (P/E) ratios by sector, based on the 500 largest publicly traded U.S. companies.

As of January 1, 2025, the Information Technology (P/E 41.53) and Consumer Discretionary (P/E 32.99) sectors are trading at the highest multiples, indicating strong investor expectations for future earnings growth. Both sectors experienced robust earnings expansion throughout 2024. On the other hand, Energy (P/E 13.56) and Financials (P/E 16.86) remain among the cheapest sectors. Financial sector earnings declined sharply in 2022 and have only seen a modest recovery since. Meanwhile, Energy companies rebounded strongly after the pandemic, but earnings fell significantly in 2024 as commodity prices declined.

Among the largest companies: Apple, Microsoft, & Nvidia are part of the Information Technology sector; Amazon.com & Tesla fall under the Consumer Discretionary sector; and Alphabet (Google) & Meta Platforms belong to the Communication Services sector.

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P/E Ratio (TTM) & Earnings-per-Share by Sector (Large Cap U.S. Companies)

* The table displays trailing Earnings Per Share (EPS), calculated based on the combined operating income of companies within each sector over the past 12 months. The values are indexed to a base of 100 as of January 1, 2022.

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Earnings Growth of U.S. Stock Market Sectors

The earnings growth of U.S. stock market sectors has varied significantly over the past few years, with some industries experiencing explosive gains while others have faced stagnation or decline.

Sectors with Strong Earnings Growth

• Consumer Discretionary and Industrials have maintained strong and consistent earnings expansion, reflecting strong consumer demand, and industrial production growth.
• Information Technology has seen robust earnings growth, supported by the rapid adoption of AI, cloud computing, and software services. The sector commands the highest P/E ratios (~40-41) due to strong future earnings potential.
• Communications has seen strong earnings recovery after having struggled in late 2022 and 2023.

Sectors with Earnings Declines or Volatility

• Materials and Real Estate have suffered earnings deterioration, with Materials experiencing a steady decline since mid-2022 due to slowing industrial demand. Real Estate earnings have also weakened amid higher interest rates, which have reduced investment and property valuations.
• Health Care has seen a slight decline in earnings despite a relatively stable P/E ratio (~23.7), suggesting moderating growth expectations as the sector faces cost pressures and regulatory uncertainties.
• Financials suffered a significant earnings decline in 2022 but have staged a recovery since 2023, benefiting from higher interest rates and improved banking sector profitability.
• Energy posted exceptional earnings growth during 2022 and early 2023, driven by surging oil and gas prices. However, earnings have declined sharply since mid-2023 as energy prices retreated, bringing valuations lower.

Defensive and Stable Sectors

• Consumer Staples and Utilities continue to exhibit modest but consistent earnings growth, supported by their essential nature. These sectors trade at relatively lower P/E ratios (~18-21), reflecting investor preference for stability over high-growth potential.

Valuation Trends and Market Preferences

• Growth-oriented sectors such as Tech, Consumer Discretionary, and Industrials command premium P/E ratios (~25-41), reflecting strong investor confidence in their future earnings potential.
• Defensive sectors, including Consumer Staples, Utilities, and Financials, tend to trade at lower multiples (~16-21) due to their slower but steady earnings expansion.
• Energy and Materials remain highly volatile, experiencing significant earnings swings depending on commodity price movements.

Earnings Growth for the Magnificent Seven Companies

Microsoft Inc (MSFT)

• Microsoft’s earnings have been on a steady upward trend, with Q4 2024 reaching $24.1 billion, up from $16.4 billion in Q4 2022.
• Growth was particularly strong in 2023, accelerating from $18.3 billion in Q1 2023 to $24.1 billion in Q4 2024.
• The company benefits from strong cloud services, AI investments, and enterprise software demand.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 24,108
o 2024 Q3: 24,667
o 2024 Q2: 22,036
o 2024 Q1: 21,939
o 2023 Q4: 21,870
o 2023 Q3: 22,291
o 2023 Q2: 20,081
o 2023 Q1: 18,299
o 2022 Q4: 16,425
o 2022 Q3: 17,556
o 2022 Q2: 16,740
o 2022 Q1: 16,728

Key Trend: Consistent growth, particularly from AI and cloud expansion

Amazon.com Inc (AMZN)

• Amazon saw a huge recovery from losses in early 2022 (-$3.8 billion in Q1 2022) to a record $20 billion in Q4 2024.
• Profitability took off significantly in 2023, climbing from $3.2 billion in Q1 2023 to $20 billion by Q4 2024.
• Improvements in e-commerce efficiency and AWS cloud profitability have been the primary drivers.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 20,004
o 2024 Q3: 15,328
o 2024 Q2: 13,485
o 2024 Q1: 10,431
o 2023 Q4: 10,624
o 2023 Q3: 9,879
o 2023 Q2: 6,750
o 2023 Q1: 3,172
o 2022 Q4: 278
o 2022 Q3: 2,872
o 2022 Q2: -2,028
o 2022 Q1: -3,844

Key Trend: Massive turnaround, driven by AWS and operational efficiencies.

Meta Platforms Inc. (META)

• Meta’s net income surged from $4.7 billion in Q4 2022 to $20.8 billion in Q4 2024, nearly quadrupling in just two years.
• After a tough 2022, Meta bounced back strongly in 2023, with profits jumping from $5.7 billion in Q1 2023 to $14 billion in Q4 2023.
• The resurgence was fueled by cost-cutting measures, AI-driven ad improvements, and Reels monetization.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 20,838
o 2024 Q3: 15,688
o 2024 Q2: 13,465
o 2024 Q1: 12,369
o 2023 Q4: 14,017
o 2023 Q3: 11,583
o 2023 Q2: 7,788
o 2023 Q1: 5,709
o 2022 Q4: 4,653
o 2022 Q3: 4,395
o 2022 Q2: 6,687
o 2022 Q1: 7,465

Key Trend: Explosive earnings growth after cost reductions and AI advancements.

Apple Inc. (AAPL)

• Apple’s earnings remained relatively stable but peaked at $36.3 billion in Q4 2024.
• There was a significant drop in Q3 2024 to $14.7 billion, but it rebounded strongly.
• While Apple remains highly profitable, its earnings growth has been slower compared to peers.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 36,330
o 2024 Q3: 14,736
o 2024 Q2: 21,448
o 2024 Q1: 23,636
o 2023 Q4: 33,916
o 2023 Q3: 22,956
o 2023 Q2: 19,881
o 2023 Q1: 24,160
o 2022 Q4: 29,998
o 2022 Q3: 20,721
o 2022 Q2: 19,442
o 2022 Q1: 25,010

Key Trend: Steady but slower growth, with occasional dips.

Alphabet Inc. (GOOG & GOOGL)

• Alphabet’s earnings saw strong growth, moving from $13.6 billion in Q4 2022 to $26.5 billion in Q4 2024.
• The company doubled its profits in two years, with cloud computing and AI contributing significantly.
• Advertising revenue rebounded after challenges in 2022.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 26,536
o 2024 Q3: 26,301
o 2024 Q2: 23,619
o 2024 Q1: 23,662
o 2023 Q4: 20,687
o 2023 Q3: 19,689
o 2023 Q2: 18,368
o 2023 Q1: 15,051
o 2022 Q4: 13,624
o 2022 Q3: 13,910
o 2022 Q2: 16,002
o 2022 Q1: 16,436

Key Trend: Consistent double-digit growth, boosted by AI and cloud expansion.

Nvidia Inc. (NVDA)

• Nvidia saw extraordinary earnings growth, skyrocketing from $680 million in Q4 2022 to $19.3 billion in Q4 2024.
• This 28x increase was driven by explosive demand for AI chips and GPUs.
• The company’s earnings have consistently risen each quarter, with the biggest jump occurring in 2023.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 19,309
o 2024 Q3: 16,599
o 2024 Q2: 14,881
o 2024 Q1: 12,285
o 2023 Q4: 9,243
o 2023 Q3: 6,188
o 2023 Q2: 2,043
o 2023 Q1: 1,414
o 2022 Q4: 680
o 2023 Q3: 656
o 2022 Q2: 1,618
o 2022 Q1: 3,003

Key Trend: Unmatched growth fueled by AI and data center demand.

Tesla Inc. (TSLA)

• Tesla’s earnings have been volatile, peaking at $7.9 billion in Q4 2023, but falling sharply to $2.3 billion in Q4 2024.
• While the company showed strong earnings in 2023, margins have declined recently, possibly due to price cuts, higher competition, and slower EV demand.
• Tesla’s profits are now lower than 2022 levels, signaling potential challenges ahead.

Quarterly Earnings (Net income by quarter, USD, millions):
o 2024 Q4: 2,356
o 2024 Q3: 2,167
o 2024 Q2: 1,478
o 2024 Q1: 1,129
o 2023 Q4: 7,930
o 2023 Q3: 1,853
o 2023 Q2: 2,703
o 2023 Q1: 2,513
o 2022 Q4: 3,714
o 2022 Q3: 3,292
o 2022 Q2: 2,259
o 2022 Q1: 3,318

Key Trend: Declining profitability, facing pricing and demand challenges.