Corporate Profits Before Taxes* As A Share Of Nominal GDP
AI-related capital expenditures continue to power U.S. growth and trade. Skeptical colleagues wondered whether revenues would ever justify the spend. As if on cue, this week’s Q2 U.S. GDP update showed that pre-tax corporate profits adjusted for inventory valuation and capital consumption tallied $4.83 trillion in the second quarter, up 22.8%, or almost $900 billion, from a year earlier. Corporate profits now account for 14.9% of nominal GDP, the highest share in data dating back to 1947, meaning that, in profitability terms, the current era outshines every “golden age” you’ve heard of since World War II. We’ll get more industry-level details later, but we can guess where the growth is coming from. Nvidia reported quarterly revenue of $96.2 billion this week, up 106% from a year ago, with over 90% of revenue coming from its data center segment. In addition, the top three hyperscalers’ cloud revenue growth rates are running at their fastest clip since 2021, with a swelling backlog, meaning demand keeps outpacing supply. With revenues up, analysts now expect even more capex in 2027. Of course, skeptics will say one more quarter of good profit doesn’t mean it will continue. Still, far from a bust, Q2 was a profit boom.
