2026-01-12 05:26:13

Recently, the market has shown an interesting divergence in profit margin expectations. On one side is institutional caution—Goldman Sachs explicitly stated they are not optimistic about companies showing substantial profit margin expansion in Q4 earnings; on the other side is market optimism—generally predicting that profit margins will jump from 12.3% to 13.6%-13.7% in 2026, a full increase of 1.3 percentage points.

How aggressive is this jump? Looking at history, we know the answer. After the pandemic, it took exactly four quarters for profit margins to expand from 10% to 12% in 2021, but now the market expects to achieve a 1.4 percentage point increase in the same time frame. Behind this is either a sudden surge in corporate pricing power or a structural reduction in costs. The problem is, the data seems to be singing a different tune.

Examining the conflicting signals from the sales side: the actual sales growth in Q4 2025 is only 1%, but inflation contribution is as high as 3.5%. In other words, companies have already exhausted their pricing power. Consumers are resistant, and sluggish actual sales growth is clear evidence. In this context, maintaining a 12.3% profit margin is already challenging, let alone expanding to 13.6%. The difficulty is indeed significant.

AI is also not bringing good news. The market’s optimism partly relies on AI productivity improvements, with capital expenditure by hyperscalers( expected to jump from $400 billion in 2025 to $539 billion in 2026. But this is a paradox—the massive capital投入 itself is a profit margin eroder. If AI monetization cannot keep pace with investment, the profits of tech giants) which account for 25% of the market( might actually be squeezed.

Perhaps the most heartbreaking forecast is for small-cap stocks. The net profit margin of Russell 2000 is predicted to soar from 3% to 5%, a 67% increase. It sounds more like a math problem than reality—small-cap stocks usually lack pricing power, and in an environment where sales growth slows and costs are hard to reduce, imagining such a doubling of profit margins is a bit too idealistic.

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GasFeeBeggar

· 1h ago

The story of this profit margin sounds like a fairy tale. Why is it so easy to increase by 1.3 percentage points? Price hikes have been exhausted, consumers are still resistant, AI investments are eating into profits, and small-cap stocks want to jump from 3% to 5%... Wake up, everyone, data doesn't lie.

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GateUser-e19e9c10

· 01-12 05:56

Another show of institutions vs. the market, with Goldman Sachs bearish and retail investors taking the bait—an old trick. Really dare to predict that small-cap stocks' profit margins will double? How optimistic is that? Costs can't even be reduced, yet they still think this way. They've already used up the pricing power card, and consumers are still resistant. How can profit margins suddenly jump? They've invested over $500 billion in AI, but aren't worried about cashing out and falling behind the pace, squeezing profits. Data contradicts expectations—another inevitable misalignment.

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TokenomicsShaman

· 01-12 05:52

Goldman Sachs is not optimistic; is the market still in a daze? The gap is quite significant... 1.3 percentage points may not sound like much, but when spread over a sales growth base of only 1%? It's a bit questionable. I just laughed at small caps going from 3% to 5%. This isn't profit margin expansion; it's an illusion... If there's no pricing power, why push ahead recklessly? Over 400 billion invested in AI, now reaching 539 billion. If this money could truly be monetized, what more analysis would be needed... The question is, can it really happen? Companies have exhausted their pricing power; consumers are already saying no. Expecting profit margins to rebound is really wishful thinking... Reality might just give the market a harsh lesson.

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NFTArchaeologist

· 01-12 05:45

Goldman Sachs says no, but the market is yy… the gap is really huge Actual sales only increased by 1% and still want to expand profit margins? That logic is a bit absurd Small-cap stocks skyrocketed from 3% to 5%? Wake up, this isn't sleepwalking AI giants pouring so much money in, the risk of profits being eaten away in reverse is quite high Raising prices has already been overused, consumers have long been resistant

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NeonCollector

· 01-12 05:44

Goldman Sachs says no, the market is still hyping, and this profit margin expectation is probably going to cause a sell-off. This data looks fabricated; a 1% increase in sales growth and still trying to expand profit margins? Consumers are already pulling back. Small-cap stocks have surged 67%. Are they dreaming or just taking a test? Can AI really make money with such heavy spending? In the end, only the giants will survive. Price hikes have been exhausted; where can they expand next? Too optimistic. The risks are right in front of us.

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