Goldman Sachs analysts report that despite a recent selloff in software stocks driven by fears over AI disruption, companies across the sector delivered robust fourth-quarter results. The analysts highlight that many firms notched solid earnings and saw positive revisions to 2026 EPS estimates, fueled by strong sales growth and improving margins. This resilience occurred even as the broader S&P 500 revenue grew 7% year-on-year, aided by a weaker dollar and solid economic growth.

However, the note underscores a persistent investor debate regarding the long-term risk of AI eroding corporate profits. The analysts point to massive planned AI spending, estimating combined U.S. hyperscaler capex at $660 billion in 2026 – a 22% and $120 billion increase from prior estimates. This surge in investment, coupled with a 7% decline in S&P 500 share buybacks in the quarter, signals potential cash flow constraints for returning capital to shareholders.

The analysts conclude that while near-term earnings strength remains evident, the significant capital outlays on AI and ongoing concerns about its disruptive potential continue to shape market sentiment and investment strategies.