Barclays Boosts S&P 500 Outlook Amid Strong AI-Driven Earnings

• Barclays raises S&P 500 targets to 6,450 in 2025 and 7,000 in 2026.

• Barclays cites strong AI-driven profits, Fed rate cuts, and upgrades Tech to Positive.

• Barclays remains cautiously optimistic despite risks, forecasting 2025 EPS $273 and 2026 EPS $309.

Barclays has increased its earnings and price projections for the S&P 500 through 2025 and 2026, attributing the upgrade to stronger-than-anticipated corporate results in the first half of the year and a robust earnings landscape despite trade tensions and labor challenges.

The bank now forecasts the index to reach 6,450 by the end of 2025, up from 6,050, supported by an expected earnings per share (EPS) of $268 compared with the previous $262. For 2026, Barclays has lifted its price target to 7,000 from 6,700, based on an EPS estimate of $295, revised up from $285.

The bank’s strategists, led by Venu Krishna, highlighted strong corporate profits and growth driven by artificial intelligence, offset by emerging labor market concerns. They anticipate three Federal Reserve rate cuts this year, which should help balance risks within the U.S. economy. Earnings have surpassed expectations, particularly boosted by Big Tech and Financials.

Analysts noted that trade tariffs have had a “less severe” impact than initially feared, though some effects could linger into 2026. Additionally, new tax measures are expected to support GDP growth through 2026. Barclays updated its sector outlook, upgrading Technology to Positive, citing resilience in software and continued data center demand. Financials remain Positive, Healthcare and Materials were downgraded to Neutral, and Consumer, Industrials, and Energy sectors stayed Negative.

Despite acknowledging macroeconomic headwinds, especially a weakening labor market with unemployment at a three-year high, Barclays maintains a cautiously optimistic stance. The team expects the market to gain support from near-term rate cuts and favorable seasonal trends later this year.

“Macro is under pressure, but we take the ’glass half full’ view,” the strategists noted. Barclays’ bull case scenario forecasts EPS of $273 for 2025 and $309 for 2026, while the bear case projects $260 and $278, respectively. Meanwhile, consensus earnings estimates remain slightly elevated compared to Barclays’ more conservative forecasts.