The net margin of S&P 500 companies stands at 16.9% and could reach a record high
The aggregate net margin of S&P 500 companies in the second quarter is estimated at 16.9%, according to FactSet data. If this level holds, it will be the highest since FactSet began tracking the metric in 2009, CNBC reports.
Compared to the first quarter, the net margin rose by 2.1 percentage points from 14.8%. A year earlier, it stood at 12.9%, and the average over the past five years is 12.4%.
The net margin reflects the portion of revenue that remains as profit for companies after all expenses have been paid. According to John Butters, senior analyst and vice president at FactSet, Alphabet and Amazon contributed the most to the S&P 500’s record high.
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Alphabet’s operating margin rose to 34% in the second quarter, up from 32% a year earlier. The company also reported $98 billion in other income, primarily due to unrealized gains on equity-related securities.
Amazon reported $53.4 billion in other income on a net basis, largely related to its investment in Anthropic. The company’s operating margin rose to 13.7% from 11.4% a year ago. Even excluding Alphabet and Amazon, the S&P 500’s net margin stands at 15%—also the highest level for the index since 2009.
In eight of the 11 S&P 500 sectors, margins rose compared with last year. The leaders were the technology sector, communication services, the non-essential consumer goods sector, and energy. Adam Shikling, a senior economist at Vanguard, attributed the improvement in metrics to sustained demand and operating leverage, which help companies convert revenue into profit more efficiently.
