The State of the Economy: What Companies Are Saying in Q1 2026 Earnings Calls

The stock market has a long history of erratic swings during periods of uncertainty. Today, a potent mix of macroeconomic headwinds, lingering AI bubble concerns, and escalating geopolitical conflicts has produced a "kangaroo" market, characterized by sharp, unpredictable single-day moves in stock prices. Earnings beats and company-specific news are met with either euphoric rallies or abrupt sell-offs, amplifying volatility.

This environment intensified on February 28, 2026, when the United States and Israel launched coordinated strikes on Iran aimed at dismantling its nuclear program. The attacks killed Supreme Leader Ali Khamenei and several other top officials. In retaliation, Iran closed the Strait of Hormuz. Roughly 20-25% of global oil supply flows through the Strait, about 20.3 million barrels per day. The closure, though ultimately unsustainable for Iran, triggered a massive spike in global oil prices. Combined with pre-existing inflation fears in the U.S., this sent shockwaves through markets. Higher energy costs ripple quickly into corporate margins, consumer spending, and economic growth. Despite President Trump’s repeated assurances that the conflict was “basically over”, investors remained skeptical. The S&P 500 declined approximately -5% in March as a result.

Sentiment shifted dramatically on April 7-8, when the U.S. and Iran agreed to a two-week ceasefire, which has since been extended but remains fragile. President Trump has described it as being on “life support” amid slow and unproductive negotiations. However, markets cheered the de-escalation as the S&P 500 delivered its fifth-best monthly return since 1989 in April, surging +10.5%.

S&P 500 Total Return from 02/16/2026-05/13/2026, Y-Charts

In the middle of the S&P 500’s brilliant recovery in April, Allbirds, a USA based shoe company, decided to pivot to an entirely new business: GPU-as-a-Service (GPUaaS), and rebrand themselves as “NewBird AI”. Following the announcement of their plans to enter the AI industry, the stock increased +582.3% on April 15, 2026.

Gamestop (GME), led by CEO Ryan Cohen, was back making headlines after they offered to buy eBay for $56 billion in May. When asked about how he would secure funding for this deal, Cohen couldn’t answer the question. Gamestop was a Roaring Kitty meme stock darling in 2021, which allowed them to avoid bankruptcy and eliminate virtually all of their long-term debt by selling shares at a premium and raising billions of dollars. Their underlying business was failing then, and it still is, with annual revenue declining from $6B in 2022 to $3.6B in 2025. For this reason, it does make sense to go after an acquisition, but eBay called the offer “neither credible nor attractive” and declined the offer.

Geopolitical noise, reliance on AI, and seemingly unserious actions taken by companies has coincided, unsurprisingly, with greater post earnings reaction volatility in recent years, as seen in the chart below. In a time when it feels like any stock could drop -10% in a day, it is important to focus on what companies are saying and how they are performing, instead of being overwhelmed by short term movements in the market. With this in mind, let’s take a look at what some of the most respected companies are saying about the state of the economy and themselves.

Bespoke Investment Group

The first quarter earnings season revealed a resilient yet divided U.S. consumer navigating lingering effects from early year inflation pressures and macroeconomic uncertainty. Banks and several value-oriented retailers pointed to steady spending and solid credit trends, while discretionary categories and lower income segments displayed more caution, especially in March amid the oil price surge triggered by the Iran conflict. Experiences such as travel and dining held up relatively well, as did essentials, but broader discretionary demand faced headwinds. AI infrastructure investment continued as a clear bright spot, with major technology firms accelerating capital expenditures. Overall, executives described an economy that remains fundamentally sound, underpinned by a resilient labor market and robust technology spending, even as tariff volatility, fuel costs, and geopolitical risks added layers of uncertainty to margins and forward outlooks.

Financial Services and Banking On the financial services side, major banks conveyed cautious optimism. JPMorgan Chase Chairman Jamie Dimon characterized the economy as resilient with consumers continuing to spend, though he and peers flagged ongoing risks from geopolitics and trade policy. Bank of America highlighted steady consumer spending growth across its platforms and stable credit quality. Goldman Sachs, Citigroup, and Wells Fargo added color around healthy capital markets activity, wealth management flows, and commercial lending pipelines. Mastercard and Visa both reported resilience in consumer spending, while remaining cautious. Mastercard CEO Michael Miebach noted, “Looking at the macro picture, the economic foundation remains generally supportive with healthy underlying consumer and business spending. However, the backdrop remains uncertain, driven by geopolitical tensions, which has put some pressure on cross-border travel.”

Consumer Credit Consumer credit metrics remained generally healthy. Synchrony, a leading provider of branded credit cards and digital banking services for consumers, reported solid profit growth and resilient spending patterns with contained credit losses. Capital One noted some pressure in lower credit quality segments but characterized overall consumer balance sheets as stable, supported by employment strength. Discover, American Express, and Ally Financial echoed these themes, citing stable delinquency trends outside of isolated lower income cohorts and continued strength in premium card spending. Buy Now/Pay Later has become more popular in recent years, led by the emergence of industry leaders Affirm, Klarna, Sezzle, and Zip. Each of these companies noted strong loan book growth paired with improving repayment behavior in Q1 2026, suggesting a resilient consumer.

Restaurants Restaurants showed early signs of stabilization after softness in March attributed to higher gas prices. Chipotle Mexican Grill reported positive same store sales for the first time in several quarters along with solid total revenue growth, reflecting improving transaction trends and new unit momentum. Dutch Bros delivered particularly strong results with robust same store sales and raised its full year guidance, underscoring healthy demand for affordable quick service options. Starbucks demonstrated clear progress under its renewed focus, with traffic gains across income brackets and a recovery that prompted modest upward adjustments to its outlook. Additional color came from McDonald’s, Yum Brands, and Wingstop, which noted resilience in value menus and breakfast even as premium traffic lagged slightly. Wendy’s, despite a plethora of value offerings, saw sales decline in the quarter due to competitive pressures across the industry. More restaurants are leaning into value offerings, which is a core piece of Wendy’s menu. Beef inflation is also a common theme amongst the restaurants, as many have exposure to beef and thus are seeing some margin pressure. This is worth monitoring over the next few quarters, as higher energy costs can drive up the price of many commodities. If these beef cost pressures were to last throughout the year, it would be problematic for a number of restaurants in the space.

AI and Cloud Infrastructure AI and cloud spending remained exceptionally robust. Major hyperscalers including Amazon, Microsoft, Google, and Meta guided to a significant increase in capital expenditures for the year, citing strong demand and improving monetization trends. Anthropic, the private company and owner of the Claude LLM, recently reported an ARR (annual run rate of revenue) of $30B in April 2026, up from $9B at the end of 2025. This is a 233% increase in ARR in a 4-month period. For reference, their main competitor (Chat GPT by OpenAI) reported a $20B ARR at the end of 2025, and a $25B run rate in April 2026. Anthropic’s growth has been explosive, led by their leadership in coding, and this has further supported the frenzy around AI related stocks. Cloud revenue growth rates stayed elevated, and executives expressed confidence in long term returns from their infrastructure investments. Additional commentary from Oracle, Broadcom, AMD, and Dell highlighted sustained strength in data center components, networking, and servers, reinforcing the view that enterprise AI adoption continues to accelerate. Reuters recently reported that “Morgan Stanley now expects AI-related CAPEX by the 5 major U.S. hyperscalers to top $800 billion this year and to reach $1.1 trillion next year. Goldstein meanwhile estimates cumulative AI infrastructure spend could reach $7.6 trillion by 2031.”

Retailers Retailers presented a tale of two consumers. Walmart posted strong U.S. comparable sales driven by units and transactions rather than price increases, gaining market share with value offerings and private brands performing especially well even among lower income households. Dick’s Sporting Goods also reported healthy comps, led by strength in fitness and athletic categories. Target, by contrast, faced softer results amid pressure in discretionary areas and uncertainty around tariffs. Home Depot reported positive comps for the quarter and maintained their full year guidance of flat comparable sales, noting a resilient showing from their core consumer base (tilted towards higher income homeowners) in May, despite a tough housing market. Comments from Costco, Dollar General, and Five Below reinforced this, with warehouse clubs and extreme value players continuing to take share from traditional department stores and mid-tier apparel names.

Automotive, Marine, and Related In automotive and related sectors, results were mixed but included encouraging recovery signals. Tesla exceeded expectations with higher automotive margins and noted improving demand in key regions. Brunswick, a boat manufacturer and owner of the popular Boston Whaler brand, highlighted some volatility from geopolitical factors and input costs in its marine business. Traditional automakers pointed to continued SUV and truck demand even as affordability remained a concern for certain buyers. Additional perspective came from Ford, Stellantis, CarMax, AutoZone, and Goodyear, which together painted a picture of steady replacement demand and fleet activity offset by higher financing costs and selective consumer hesitation on big ticket purchases.

IPO Pipeline The IPO pipeline is shaping up to be one of the most active in recent memory. SpaceX, OpenAI, and Anthropic are all advancing toward public listings with potentially massive valuations, which could provide a significant test of the current enthusiasm for artificial intelligence and space technologies. SpaceX officially announced their IPO on May 20, 2026. The pioneering space exploration company is targeting a valuation of roughly $1.8 trillion, about 96x their 2025 revenue of $18.7 billion. For reference, Tesla, known for its consistently premium valuation, currently has a price to sales ratio of 15x. With a goal of raising up to $75 billion, SpaceX could be the largest IPO in history.

Housing The housing market continues to be challenged as high mortgage rates, low affordability and persistent inventory/listing imbalances defined Q1 2026. Zillow’s CFO said, “We're planning for the housing market to continue to be effectively flat. You're right that it started off slower than I think folks anticipated. We're not planning for that to get any better.” At this point, housing companies like Zillow and Compass are working to improve their durability and platform differentiation as they wait for the market to recover. On a positive note, Compass CEO Robert Reffkin highlighted that agent utilization is at the highest level in recorded history, with 91% of home sellers and 88% of homebuyers choosing to use a real estate professional in 2025. It is expected that rate cuts could lead to a surge in activity, as 40 million homeowners want to move in the next 12 months, but only 1 in 5 think they can, according to Opendoor’s CEO Kasra Nejatian. However, cuts in short term rates may not materialize into lower mortgage rates, which is an additional area of concern in the housing market.

Travel and Leisure Travel demand proved resilient despite fuel cost volatility. JetBlue saw solid revenue trends with particular strength in premium products, while cruise operators Carnival and Norwegian reported healthy bookings even as they adjusted guidance downward for macroeconomic and geopolitical considerations, both citing the Middle East conflict as a potential travel barrier. Delta Air Lines, Marriott, Hilton, and Booking Holdings generally reinforced this resilience, noting strong corporate travel recovery and leisure demand for experiential getaways.

Luxury Goods Luxury spending faced more noticeable pressure. LVMH cited softness linked to reduced tourism in the Middle East, while Ferrari showed greater resilience but still noted selective behavior among high end consumers. Additional commentary from Kering, Richemont, and Tapestry pointed to uneven demand across regions, with Asia and Europe softer while the U.S. held up better for accessible luxury and experiential categories.

In summary, Q1 commentary depicts a U.S. consumer that remains capable of spending even as pockets of pressure persist from inflation and external shocks. While tax refunds are expected to be around 20% larger this year according to Morgan Stanley, middle- and high-income consumer stand to benefit most from the expanded deductions and credits. Lower income groups are still feeling the impact of higher fuel costs, with higher income and value focused shoppers driving outperformance for several large retailers and select growth categories. The 90+ day credit card delinquency rate for all borrowers is roughly 13.1%, but the number is significantly higher for lower-income Americans, with the poorest 10% of ZIP codes seeing 90+ day delinquency rates surpass 20%, according to the Federal Reserve Bank of St Louis. Companies are responding with disciplined cost management and an emphasis on affordability. The AI capital expenditure boom continues to serve as a powerful tailwind for technology and industrial earnings. While the post ceasefire stabilization is encouraging, ongoing geopolitical and policy risks suggest investors should remain attentive to potential impacts on margins and discretionary demand through the remainder of 2026.

In summary, Q1 commentary depicts a U.S. consumer that remains capable of spending even as pockets of pressure persist from inflation and external shocks. While tax refunds are expected to be around 20% larger this year according to Morgan Stanley, middle- and high-income consumer stand to benefit most from the expanded deductions and credits. Lower income groups are still feeling the impact of higher fuel costs, with higher income and value focused shoppers driving outperformance for several large retailers and select growth categories. The 90+ day credit card delinquency rate for all borrowers is roughly 13.1%, but the number is significantly higher for lower-income Americans, with the poorest 10% of ZIP codes seeing 90+ day delinquency rates surpass 20%, according to the Federal Reserve Bank of St Louis. Companies are responding with disciplined cost management and an emphasis on affordability. The AI capital expenditure boom continues to serve as a powerful tailwind for technology and industrial earnings. While the post ceasefire stabilization is encouraging, ongoing geopolitical and policy risks suggest investors should remain attentive to potential impacts on margins and discretionary demand through the remainder of 2026.