Corporate America faces the highest earnings bar in almost three years as it prepares to report second-quarter results, according to Goldman Sachs Group Inc. strategists.

Single-stock analysts predict profits at S&P 500 firms rose 9% on average in the April-June period — the biggest year-over-year increase since the fourth quarter of 2021, strategists led by David Kostin wrote in a note dated June 28.

“The magnitude of earnings-per-share beats is likely to diminish as consensus forecasts set a higher bar than in previous quarters,” Kostin said. “We expect the outperformance ‘reward’ for stocks beating estimates will be smaller than average again this quarter.”

US stocks are near records, driven by bets on interest-rate cuts from the Federal Reserve and the buzz around artificial intelligence. Earnings expectations for the coming 12 months have never been so high.

The first-quarter reporting season got a muted response from investors.

While almost 80% of S&P 500 companies posted better-than-expected profits, stocks underperformed the benchmark index by about 12 basis points on the day of their results, according to the median reading of data compiled by Bloomberg Intelligence.

This time around, Goldman’s sentiment indicator is already at elevated levels, according to Kostin.

“Investors remain focused on AI, although cyclical growth optimism has moderated,” the strategist said. “Accordingly, the reward for beats should be smaller than average this quarter, although not as extreme as during the first-quarter season.”