Market Analysis: Strong Revenue Growth Supports S&P 500 Gains Despite Overextension Concerns

This analysis is based on the ETF Trends article [4] published on November 13, 2025, which addresses investor concerns about market overextension following steady gains since April 2025. The article argues that recent market gains are well-supported by strong company fundamentals, particularly robust third-quarter revenue growth.

The steady market advance since April 2025 is indeed substantial, with major indices showing significant gains: S&P 500 (+21.09%), NASDAQ Composite (+33.59%), Dow Jones Industrial (+14.50%), and Russell 2000 (+20.20%) [0]. However, recent performance divergence is emerging, with the Russell 2000 declining 1.85% over the past 30 days while the S&P 500 gained 1.08% and Dow Jones rose 2.94% [0], suggesting potential market rotation concerns.

The article’s thesis is strongly supported by earnings data. S&P 500 Q3 2025 revenue growth averaged 8.2% year-over-year, representing significantly stronger growth than the previous four quarters [0]. This aligns with broader earnings season data showing 82% of S&P 500 companies reporting actual EPS above estimates (above the 5-year average of 78%) [1], with companies reporting earnings 7.0% above estimates on average [1]. The blended revenue growth rate of 8.3% for Q3 2025 marks the highest since Q3 2022 [1], with nearly 70% of S&P 500 companies beating sales forecasts - the highest share in four years [2].

Current trading shows sector divergence with Healthcare leading (+1.35%) while Technology underperforms (-0.51%) despite being a key growth driver [0]. Communication Services shows resilience (+0.06%) [0]. This suggests potential sector rotation, though the fundamental strength appears broad-based with over 90% of S&P 500 companies having reported Q3 results as of November 7, 2025 [0].

The 8.2% year-over-year revenue growth is particularly noteworthy given macro headwinds including uncertainty around tariffs and government legislation [0]. This marks the 20th consecutive quarter of revenue growth for the S&P 500 [1], demonstrating remarkable consistency. The emphasis on revenue growth over earnings is strategically sound, as revenue provides a clearer picture of corporate health without being affected by accounting adjustments and one-time events [0].

Despite broad-based strength, growth remains unusually concentrated, with six mega-cap tech companies contributing almost half of earnings growth (5.3 percentage points of 11.68% headline growth) [1]. This concentration creates vulnerability, as market performance is heavily dependent on a limited number of large-cap stocks.

Analysts expect continued strength with S&P 500 earnings projected to grow 7.3% in Q3 and 7.2% in Q4 2025 [1]. Full-year 2025 earnings are projected to rise 10.5%, with 13.2% growth forecast for FY 2026 [1], suggesting that current revenue growth may be sustainable.

The Russell 2000’s recent decline (-1.85% over 30 days) [0] while large-cap indices continue to gain suggests potential market rotation or concerns about smaller companies’ fundamentals. This divergence may indicate changing risk appetites or differential exposure to economic conditions.

1. Valuation Sustainability
   : Despite strong fundamentals, extended market gains raise questions about valuation sustainability, particularly given the S&P 500’s 21% gain since April [0].

2. Federal Reserve Policy Uncertainty
   : Fed’s Daly indicates it’s “premature” to decide on December rate cut [3], creating uncertainty that could impact growth stocks disproportionately.

3. Concentration Risk
   : Heavy reliance on mega-cap tech names for growth creates vulnerability to sector-specific shocks or regulatory changes.

4. Sector Rotation Dynamics
   : Current underperformance of Technology (-0.51%) and strength in Healthcare (+1.35%) [0] may signal shifting market dynamics that could affect portfolio allocations.

1. Fundamentally Supported Growth
   : Strong revenue growth provides fundamental support that could sustain market levels if earnings guidance remains positive.

2. Quality Earnings Season
   : With 82% beat rate on EPS estimates [1], companies demonstrating operational excellence may continue to outperform.

3. Economic Data Clarity
   : With federal government reopening, catch-up data releases may provide clearer economic picture [3], potentially reducing uncertainty.

The analysis reveals several risk factors that warrant attention. While current revenue growth provides fundamental support for market levels, the combination of extended market gains (+21% since April), concentration in mega-cap stocks, and Federal Reserve policy uncertainty may create volatility risk. Historical patterns suggest that markets showing such strong performance over extended periods often experience corrections when fundamentals diverge from expectations or when macroeconomic conditions shift.

• S&P 500: +21.09% since April 1, 2025 (from $5,597.53 to $6,778.10) [0]
• NASDAQ Composite: +33.59% since April 1, 2025 (from $17,221.55 to $23,006.47) [0]
• Russell 2000: -1.85% over past 30 days [0]

• S&P 500 Q3 2025 revenue growth: 8.2% year-over-year [0]
• Blended revenue growth rate: 8.3% for Q3 2025, highest since Q3 2022 [1]
• EPS beat rate: 82% of S&P 500 companies above estimates [1]
• Sales beat rate: Nearly 70% of companies, highest in four years [2]

• Q3 2025 earnings growth: 7.3% expected [1]
• Q4 2025 earnings growth: 7.2% expected [1]
• Full-year 2025 earnings growth: 10.5% projected [1]
• FY 2026 earnings growth: 13.2% forecast [1]

1. Q4 2025 guidance quality and sustainability of revenue growth
2. Federal Reserve policy developments and interest rate impacts [3]
3. Economic data releases following government reopening [3]
4. Sector performance divergence between large-cap and small-cap stocks
5. Concentration risk management given mega-cap tech dominance

The evidence suggests that while market gains have been substantial, they are fundamentally supported by strong revenue growth and earnings performance. However, investors should remain vigilant about concentration risks, policy uncertainty, and potential sector rotation dynamics.