Stocks’ (mostly) steady march higher since April has some investors concerned about an overextended market. However, we think evidence suggests that recent gains have been well-supported by strong company fundamentals.
Case in point: Third-quarter revenue for companies in the S&P 500 shot up 8.2% on average compared to a year ago (see the chart). That’s a significantly stronger growth rate than we’ve seen during the previous four quarters. And with more than 90% of the index’s companies having reported their quarterly results, that sales growth number looks pretty locked in.
S&P 500 Sales Growth (Year-Over-Year)
With so much focus on corporate earnings—a key component of market performance—corporate sales growth (sometimes called top-line growth) doesn’t always get the attention it may deserve. But in some ways, revenues paint a clearer picture of companies’ health than do earnings, which are often adjusted based on accounting rules, one-time events, and other factors that may not reflect businesses’ actual operations.
Ultimately, top-line growth is the key indicator of core business strength. The robust growth during the third quarter—particularly given the uncertainty around tariffs and government legislation—is another encouraging sign the market’s impressive performance this year is being driven not simply by high hopes for the future, but by strong fundamentals today.
By Mike Dickson, Ph.D.
Originally published November 12, 2025
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