From layoffs to AI, BofA flags the 4 big takeaways for investors from earnings season

• Earnings season is winding down, and BofA says there are a few key takeaways for the market.
• Companies reported stronger-than-expected quarterly results and C-suite execs were more positive on calls.
• Strategists homed in on discussions of layoffs and AI spending in earnings calls.

Earnings season is winding down, and some key takeaways for investors have emerged from the results.

The latest batch of financials has been largely upbeat, though there's lingering caution around things like AI capex plans from the biggest tech firms. Amazon, for instance, saw shares plunge after earnings last week as its spending plans shocked investors.

Yet, for the most part, Bank of America says that results have largely delivered despite lingering background noise about the AI arms race.

With about 75% of S&P 500 companies reporting, here are what BofA analysts say are the big takeaways for investors from fourth-quarter earnings season.

Q4 earnings beat historic averages, but lag Q3

Growth is stronger than expected and above historic averages, but has stumbled on a quarter-over-quarter basis.

Nearly 70% of companies delivered earnings per share that beat consensus estimates, compared to the historical average of 60%. In the prior quarter, the beat rate was 75%, the strongest figure since 2021.

Sales for the companies that have reported so far are also strong. Bank of America noted that revenue excluding the financials and energy sectors is on pace for the highest year-over-year growth since 2022.

Corporate optimism is at record levels

Bank of America's predictive analytics team examined earnings calls to assess sentiment among company executives. They found that positive corporate sentiment hit a record high.

"Corporate sentiment is tracking at a record high in 4Q, just above its pre-Liberation Day level. "Weak demand" mentions ticked higher but are still well below 2023-2024 levels."

They highlighted the tech and healthcare sectors as having the strongest guidance, while real estate and consumer staples were the weakest.

The AI race hasn't slowed a bit

As expected, AI was a key focus for Wall Street this earnings season, especially amid AI disruption fears that are fueling volatility and investors' concerns about the return on colossal capex.

Hyper scalers' AI spending guidance came in 35% above Wall Street's expectations. Amazon plans to spend $200 billion this year, while Alphabet and Meta expect to spend up to $185 billion and $135 billion, respectively.

The strategists said that hyperscalers' capex guidance is decelerating year over year, but noted that 2025 capex was revised up by a "whopping" 30% from initial guidance.

Amazon was punished by investors after it revealed its spending plans, with the stock plummeting after earnings. Other Big Tech names, however, fared better. Meta's capex outlook was offset by strength in its ad business, proving that investors can get comfortable with high AI spending if they like what they see elsewhere.

Layoffs spark worries, but other labor signals are more positive

Job cuts in January hit the highest point since 2009. Despite some worrying headlines about layoffs at high-profile companies like Amazon, Bank of America highlighted some "less pessimistic" readings into the labor market.

The strategists said that the Job Openings and Labor Turnover Survey (JOLTS) layoff rate holds low, though hiring has fallen off — a low-hire, low-fire state.

They also noted that "layoff" mentions did tick up, but they see minimal evidence that AI is meaningfully weakening labor demand.