Investors are shifting capital from technology to value stocks as second-quarter earnings beat expectations across a broad range of sectors, signaling a potential rebalancing of market leadership away from mega-cap growth names. The Russell 1000 Value Index has outperformed the Russell 1000 Growth Index by roughly 15% year-to-date in 2026, according to State Street Global Advisors data through July 21.
The rotation reflects a fundamental shift in how the market rewards earnings performance. In the second quarter, 85% of S&P 500 companies reported stronger profits than expected, with 81% beating revenue expectations, according to FactSet data cited by Facet Wealth. Profits grew 28.8% compared to the same period last year—a major acceleration from the first quarter’s 13.1% growth rate.
What makes this earnings season unusual is its breadth. Eleven of the twelve major economic sectors saw earnings growth accelerate since the end of 2025, while all twelve sectors achieved faster revenue growth. This broad-based strength has rewarded value-oriented companies that investors had previously overlooked in favor of high-growth technology stocks.
Why Value Tech Is Winning Too
The narrative around value’s resurgence often centers on a rotation into traditional cyclical sectors like financials and energy. However, the story is more nuanced. Technology has quietly become the largest contributor to value’s outperformance year-to-date, with value-oriented technology names outpacing growth tech by nearly 70%, according to State Street analysis. The weight of technology in the Russell 1000 Value Index has grown from just 3.7% two decades ago to 18.6% as of June 30, 2026, making it the second-largest sector weight after financials.
Financials have also been a key driver of value’s strength. Banks within the Russell 1000 Value Index returned roughly 6% year-to-date, outperforming their counterparts in the broader S&P 500 by 2.5%. This strength was reinforced during earnings season, when major banks including JPMorgan Chase, Bank of America, and Citigroup reported results that exceeded expectations during the week of July 13, according to State Street Global Advisors.
Valuations have also tilted the advantage toward value stocks. The Russell 1000 Value Index trades at 17.5x forward earnings, compared to 20.2x for the broader Russell 1000 Index and 24.2x for the Russell 1000 Growth Index, as of July 21. While all three indices sit above their 20-year averages, value remains the least stretched by historical standards.
The earnings-driven rotation reflects a market reassessing what it values after years of concentrating heavily on mega-cap technology and artificial intelligence plays. When companies across the economy deliver strong results—not just a narrow group of AI infrastructure suppliers—investors gain confidence in broadening their holdings beyond the highest-growth names. This dynamic mirrors patterns from earlier market rotations, when earnings breadth preceded sustained shifts in market leadership.
Investors should monitor whether this rotation sustains. State Street strategists note that value’s outperformance depends on three key conditions: continued strong earnings growth from value companies, a positively sloped yield curve that supports bank profitability, and value’s valuation discount relative to growth stocks remaining intact. If any of these factors weaken, the momentum behind the shift could slow.
Sources
- Facet Wealth — Q2 2026 earnings data: 85% of companies beat profit expectations, 81% beat revenue expectations, earnings growth of 28.8% year-over-year, and broad sector acceleration.
- State Street Global Advisors — Russell 1000 Value Index outperformance of 15% year-to-date, value tech outperformance of 70%, technology weight growth from 3.7% to 18.6%, financials sector returns and earnings strength, and forward P/E multiples.
- Wall Street Journal — Russell 1000 Value Index gained about 20% year-to-date 2026.
