Barclays has pushed up its S&P 500 price objective for the end of the year to 7,800 from 7,650 and added a preliminary 2027 target of 8,800, pointing to a firmer earnings trajectory even as it warns investors about rising risks heading into the latter half of the year.
In a note outlining the change, the bank’s strategists led by Venu Krishna stressed that equities have remained uneven amid shifting geopolitical expectations and continuing questions over the pace, funding and monetization of AI investment. "Equities remain choppy as peace talks stop and start, and questions linger around AI spend, funding and monetization, higher for longer rates, and consumer strength," they wrote.
Barclays said recent labor market strength lowers the immediate risk of recession, yet that same tightness pushes the timeline for interest-rate cuts further into the future. The bank also observed that input costs are on the rise again, albeit not yet to a level that would derail the economic cycle. Still, the strategists concluded that "the balance of risks still leans constructive."
On the profit front, Barclays raised its 2026 earnings-per-share estimate for the S&P 500 to $337 from $321, a figure slightly under the Street consensus of $341. The bank’s projection for 2026 implies about 21% year-over-year growth from an estimated $279 in 2025. Barclays also added a preliminary 2027 EPS forecast of $389, which sits below the Street projection of $398.
The firm pointed to three primary drivers behind its more optimistic earnings stance: a first-quarter earnings season that outpaced expectations, reflationary forces supporting nominal revenue growth, and sturdy industrial activity. Barclays said the increased price target was driven largely by the higher earnings estimate, while it also made a small reduction to its valuation assumptions.
Specifically, the bank trimmed its multiple for large technology companies to a baseline of 26 times earnings, down from 27.5 times previously, to reflect uncertainty around the scale, funding and timing of AI infrastructure expenditure. On that basis the blended multiple applied to the index is 23 times 2026 EPS.
Regarding the outlook for AI-related capital expenditures, Barclays projects total hyperscaler capex will exceed $1.1 trillion by 2028, a level roughly 26% above current Street estimates. The bank cautioned that this outsized capex outlook could create stress, noting "a growing mismatch between internally generated cash flow and projected capital requirements."
In terms of sector positioning, Barclays made several notable adjustments. The bank downgraded Financials to Neutral, citing an absence of the bullish outcomes it had anticipated as private credit concerns, regulatory risk and potential AI disruption weighed on non-bank components of the sector. Healthcare was moved up to Neutral after Barclays concluded that most downward earnings revisions across the sector have likely run their course.
Barclays maintained a Positive stance on Technology, Media and Telecom (TMT), Industrials and Utilities. It remained Negative on Consumer stocks, pointing to higher inflation and moderating income gains that the strategists said were expected to create "lagged pressure in 2H."
The strategists also highlighted several risks to monitor as the year progresses, including resurgent inflation, a possible narrowing of the Federal Reserve’s rate path under a new Fed chair, and further pressure on consumer spending. They warned that with central bank support fading and market positioning reduced, earnings clarity and the trajectory of AI capital spending will need to shoulder more of the burden for sustaining the equity bull case. "The equity bull case remains intact, but earnings and AI capex visibility must do more of the work as Fed support fades and positioning is less able to absorb disappointment," they wrote.
In sum, Barclays has increased its bullishness on index-level earnings and prices while simultaneously lowering some valuation assumptions and flagging a suite of macro and sector-level risks. The bank’s assessment balances a constructive tilt on earnings against lingering uncertainty over inflation dynamics, consumer resilience and the financing and monetization timetable for large-scale AI investments.