During quarterly earnings season, surprises can drive headlines and quick moves in share prices. The surprises might be sales or earnings-per-share numbers that come in higher or lower than analysts expect. The surprises might also be changes to the companies' own estimates for subsequent quarters. But maybe it would be helpful for long-term investors to take a look at profit-margin trends.

We are pretty far along in third-quarter earnings season. Then again, earnings season never really ends, because 27% of companies in the S&P 500 SPX have fiscal reporting periods that don't match the calendar, according to data supplied by LSEG. For example, on Aug. 27, Nvidia Corp. (NVDA) announced results for the second quarter of its fiscal 2026, which ended on July 27. The company is expected to announce results for its most recent fiscal quarter on Nov. 19.

Through Tuesday, 75% of companies in the S&P 500 had reported results for fiscal quarters ended Aug. 16 or later.

We screened those 373 companies to see which ones had increased sales per share the most while also improving profit margins. Here are the details of the screening process:

-- Increased quarterly revenue per share from the year-earlier quarter. We screened for changes in revenue (or sales) per share rather than raw revenue, because the per-share numbers incorporated any dilution to a company's stock if the company issued shares to raise money or to help finance the acquisition of another company. Sales will rise if a company acquires a competitor. But the per-share figure illustrates how much of that increase is "available" to investors who held the acquiring company's stock before the new shares were issued. Sales per share will increase more rapidly than revenue if a company lowers its share count by repurchasing stock. All per-share figures are adjusted by LSEG for any stock splits.

-- Improved gross profit margins. A company's gross margin is its net sales less the cost of goods or services sold, divided by sales. Net sales are sales minus returns and discounts, such as coupons. The cost of goods or services sold includes the expenses incurred when making the items or providing the services. Gross margin is a measurement of pricing power and core efficiency.

-- Improved operating margins. A company's operating margin incorporates more overhead and other expenses that aren't directly related to the production of goods and services. It can be summarized as earnings before interest and taxes, divided by sales.

Profit margins vary widely by industry. For example, a manufacturer of heavy equipment has higher input costs than a mature software company. Here, margin comparisons are most useful for companies competing within the same or similar industries.

It is a good sign for any company to show a combination of rising revenue and improving gross and operating margins. The gross margin reflects pricing power for products and services, while the operating margin adds a broader efficiency component.

Among the 373 companies we screened, gross and operating margins were available from LSEG for 332 of them. Gross margins aren't available for many companies in the financial sector, because banks and insurers have their own industry-based profitability metrics.

These 15 companies in the S&P 500 have shown the largest year-over-year increases in quarterly revenue per share this earnings season, while also improving gross and operating margins from their year-earlier fiscal quarters:

You might need to scroll the columns or flip your screen to landscape to see the entire table.

Any stock screen is limited to a small number of data points. If you see any stocks of interest, you should do your own research to form your own opinion about the companies' long-term prospects.

One way to begin that research is by clicking on the tickers for more information.

Sector margin improvement

For context, let's look at operating margins for the 11 sectors of the S&P 500. These margins are compiled by LSEG. They were updated Wednesday morning. The margin calculations are weighted by companies' market capitalization, as is the S&P 500. The margins reflect the companies' most recent reported quarterly results.

In this table, the sectors are ranked by operating margin for the most recent quarter, with comparisons to the year-earlier quarter. Operating margins for the full index are at the bottom:

Operating margins have improved for eight of the 11 sectors of the S&P 500.

It might surprise you to see the healthcare sector near the top of the list, especially since this sector has returned 6.9% so far in 2025, while the full S&P 500 has returned 16.4%, with both figures including reinvested dividends. But one company can have quite an effect on a sector's margin because of weighting to market capitalization. Elly Lilly $(LLY)$, which ranks third on the screen above, has a 13.6% weighting in the Health Care Select SPDR ETF XLV, which tracks this S&P 500 sector by holding all of its stocks.

In an email exchange with MarketWatch, Dan Kim, who co-manages the Saturna International Fund SSIFX SIFZX, pointed to "AI demographics" as they relate to the broad improvement for large companies' profit margins. He broke companies benefiting from the rollout of generative artificial intelligence into three categories:

-- Enablers offering products and services that help companies boost efficiency and productivity;

-- Adopters implementing technology that boosts productivity;

-- Practitioners that "not only offer productivity-enhancing technologies, but also deploy these same technologies internally."

"The practitioners will lead the margin expansion trajectory initially," Kim wrote, adding that investors' focus "should move to the adopters seeing the larger improvement as the monetization [of AI] continues to mature."