Corporate Profits Are Growing. Will Hiring?

It wasn’t supposed to be like this. With tariffs, trade tensions, and consumers cutting back on spending, all signs pointed to corporate earnings taking a hit this quarter. But instead, profits are growing—even more than analysts expected.  

So far, S&P 500 companies are on track to post their best quarterly results since 2021. Nearly nine out of ten companies reporting third-quarter earnings have beat analyst estimates, with those in the financial, information-technology, and industrial sectors leading the way. S&P 500 companies are on track to report earnings growth of 9.2%, nearly a point and half above what analysts projected when the third quarter ended on September 30. The question now: What will they do with the extra earnings?  

Jason Waterman, a senior client partner in the Global Financial Officers practice at Korn Ferry, says that firms have grown earnings amid economic volatility through a studious combination of investor-pleasing measures like cost-cutting, investment in AI, and stock buybacks. The first two measures are correlated—AI spending is expected to lead to growth as efficiency and productivity improve and less labor is needed. As for buybacks, as of mid-August, US firms had announced nearly $1 trillion worth, slightly below the all-time high of $1.1 trillion in 2022. The approach, says Waterman, is “control what you can, and invest in the business.”  

To be sure, only 30% of S&P 500 companies have reported earnings so far, and the third-quarter outlook still could be substantially altered, with others—including major technology, consumer goods, industrial and manufacturing firms—set to report in the next two weeks. 

David Wise, vice chairman of the Rewards practice at Korn Ferry, says clients plan to budget for full-year 2026 by following the same course of returning capital to shareholders and invest in the business, particularly until there is more clarity on such issues as the US government shutdown, tariffs, and AI. “They are planning to hold the line, and put any excess cash towards AI transformation,” he says.  

For workers, that may mean less hiring. Major technology, financial, and consumer-goods leaders have publicly stated they believe their firms can grow while maintaining or even downsizing their workforces. “Companies aren’t in a rush to hire,” is how Beau Lambert, a senior client partner in the Financial Officers practice at Korn Ferry, characterizes what he’s hearing from CFO clients. He says firms are being rewarded for buybacks and AI investment, which are higher priorities for investors than adding headcount is. “The mantra is, stay lean and be surgical,” says Lambert.  

Put another way, there will be hiring, but in a much more “targeted and pointed way,” says Waterman. Industries that are perpetually understaffed, like healthcare, will see more hiring than others, but overall Waterman expects firms to focus on candidates with in-demand skills and roles. Lambert agrees, saying CFOs are trying to balance returning capital to keep the market happy with asking if enough is going back into innovation, people, and long-term differentiators. “The best CFOs are using this moment to think a few cycles ahead,” he says.  

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