US Corporations Lift After-Tax Profits 2.15 Times Since 2020 as Efficiency Drives Margins Higher
Updated
Updated · businessday.co.za · Sep 17
US Corporations Lift After-Tax Profits 2.15 Times Since 2020 as Efficiency Drives Margins Higher
1 articles · Updated · businessday.co.za · Sep 17
Summary
After-tax US corporate profits have risen 2.15 times since Q1 2020, outpacing 1.8-times growth in S&P 500 earnings and 1.5-times growth in GDP.
Efficiency gains—not faster sales growth—are driving the surge, with nonfinancial corporations' share of GDP holding near 50% while profit per unit of real value added climbed to 20% in 2026 from about 4% in 2000.
That margin expansion reflects lighter capital use, a more productive workforce and stronger return discipline, while real capex by nonfinancial corporations has still increased 23% since 2020 to about $3 trillion.
AI is the main area of aggressive reinvestment: Google, Amazon, Microsoft, Meta and SpaceX are projected to spend more than $1.2 trillion on capex by 2028 as investors bet further earnings growth above 30%.
The broader question is how long unusually high returns can last before competition erodes them toward a more normal 10% annual return on capital.