The dollar's effect on S&P 500 earnings in 2026 is smaller than the headlines suggest but far from zero: currency added about 2 percentage points to Coca-Cola's (KO) second quarter net revenue growth and 2 points to its comparable earnings per share, 1 point to Procter & Gamble's (PG) fiscal fourth quarter sales growth, and 1 point to Johnson & Johnson's (JNJ) reported sales growth [1][2][3]. Those tailwinds arrived even though the Federal Reserve's broad dollar index was essentially flat for the year at 119.70 on July 31, 2026, versus 119.75 at the end of 2025 [6]. The explanation is that earnings compare this year's quarter with last year's, and against the second quarter of 2025 the euro is stronger while the yen is weaker, so the effect depends on where a company sells. As of July 31, 2026, the second quarter reporting season shows a modest net currency benefit for large multinationals, with a warning from P&G that the tailwind is fading.
Why the dollar matters for S&P 500 earnings
Large US companies earn a substantial share of revenue outside the United States. When the dollar strengthens, foreign sales translate into fewer dollars, so reported revenue and profit fall even if local currency sales are unchanged. When the dollar weakens, the reverse happens. This is called translation exposure, and companies report it as the gap between reported growth and organic, operational or constant currency growth. A second, slower effect runs through competitiveness: a strong dollar makes US exports more expensive abroad and imports cheaper at home, which affects volumes over years rather than quarters.
Two timing details matter. First, earnings compare a quarter with the same quarter a year earlier, so what counts is the year over year change in exchange rates, not the change since January. Second, many companies hedge part of their exposure for 12 to 18 months, which delays the effect. Both details explain why 2026 earnings show currency tailwinds while the dollar index has barely moved this year.
What the exchange rates actually did
Monthly data from DataPorium's forex page show the year over year picture that drove second quarter results. In June 2025 the euro traded at about 1.136 dollars; in June 2026 it was about 1.164, roughly 2.4% higher, and the gap was wider in April (about 1.080 versus 1.159) [5]. The yen went the other way: USD/JPY rose from about 143.6 in June 2025 to about 159.7 in June 2026, a yen decline of roughly 10% [5]. A company that earns mostly in euros therefore booked a tailwind in the second quarter, while one with heavy Japanese exposure booked a headwind.
The Fed's broad dollar index, which averages across 26 trading partner currencies, tells the net story: 119.75 at the end of 2025, a high of 121.41 on June 24, 2026, and 119.70 on July 31 [6]. Year to date, the dollar is unchanged on a trade weighted basis; year over year it is somewhat weaker against the euro and stronger against the yen [5][6].
Company examples from the second quarter of 2026
Coca-Cola: a 2 point tailwind and a raised outlook
Coca-Cola reported on July 28 that second quarter net revenues grew 7% to $13.4 billion, with organic revenue growth of 6%, and that currency contributed a tailwind of about 2 percentage points to net revenue [1]. Comparable EPS rose 11% to $0.97, including a 2 point currency tailwind, and operating income grew 9% [1]. For the full year the company now expects a currency tailwind of about 1% to comparable net revenues and about 3% to comparable EPS, based on current rates and hedged positions [1]. Coca-Cola is the clearest case of a global consumer company benefiting from a dollar that is weaker than a year ago in its largest markets.
Procter & Gamble: tailwind now, headwind ahead
P&G's fiscal fourth quarter (April to June) net sales rose 2% to $21.2 billion, and foreign exchange contributed 1 point of that growth; organic sales were flat [2]. For the full fiscal year, net sales grew 3% to $87.0 billion, with 2 points from currency and 1 point from pricing, while core EPS rose 1% to $6.89 and currency neutral core EPS was unchanged [2]. Looking ahead, P&G guided to a fiscal 2027 headwind of roughly $1 billion after tax from raw materials, energy and transportation costs plus about $50 million after tax from unfavorable foreign exchange, together about $0.56 per share or an 8 point drag on core EPS growth [2]. The message is that the currency benefit of the past year is turning, while energy driven cost inflation is the larger problem.
Johnson & Johnson: 1 point of currency on top of 5.6% operational growth
J&J reported second quarter sales of $25.3 billion, up 6.6% on a reported basis and 5.6% operationally, meaning currency added about 1.0 point [3]. Adjusted EPS was $2.90, and the company raised full year guidance to reported sales of $101.1 billion at the midpoint, adjusted EPS of $11.68 and adjusted operational EPS of $11.58, with the guidance assuming a euro rate of $1.15 [3]. The gap between $11.68 and $11.58 shows how much of the year's expected profit growth comes from currency: about $0.10 per share.
Microsoft: a 1 point difference at the scale of $90 billion
Microsoft's (MSFT) fiscal fourth quarter revenue was $90.0 billion, up 18% as reported and 17% in constant currency, and full year revenue of $331.8 billion grew 18% reported and 16% in constant currency [4]. Full year operating income rose 21% reported and 19% in constant currency [4]. For a company growing this fast, a 1 to 2 point currency contribution is small in relative terms but large in dollars: roughly $5 billion of the year's revenue growth reflects translation rather than demand [4].
How investors may read currency effects in earnings
The 2026 results suggest a simple framework:
- Look at operational or constant currency growth first; that is the number management controls [3][4].
- Check the year over year exchange rate, not the year to date move; the euro is up about 2% to 7% on a year earlier while the yen is down about 10% [5].
- Read the guidance for the currency assumption, such as J&J's $1.15 euro or Coca-Cola's roughly 3% EPS tailwind, and ask what happens if the dollar index returns to its June high of 121.41 [1][3][6].
- Separate currency from cost inflation; P&G's energy and materials headwind is twenty times its currency headwind [2].
A strong dollar is not bad for the economy as a whole: it lowers import prices for consumers and reflects confidence in US assets. For index level profits, the effect is a translation adjustment of a few percentage points that reverses when rates move. Investors may consider tracking the broad dollar index alongside company guidance through DataPorium's stock market data.
Currency added roughly 1 to 2 points to the second quarter growth of large S&P 500 companies in 2026, but the benefit depends on the year over year rate, and P&G already sees it turning into a headwind.
Key takeaways
- Coca-Cola reported a 2 point currency tailwind to second quarter revenue and EPS and expects about 3% for full year EPS [1].
- P&G booked 1 point of currency in its fiscal fourth quarter and 2 points for the year, but guides to a $50 million after tax FX headwind in fiscal 2027 [2].
- J&J's reported growth of 6.6% included 1.0 point of currency, and its guidance assumes a euro at $1.15 [3].
- Microsoft grew revenue 18% reported and 16% in constant currency for fiscal 2026 [4].
- The broad dollar index was flat year to date at 119.70 on July 31, but the euro is stronger and the yen weaker than a year earlier [5][6].
Frequently asked questions
Does a strong dollar hurt S&P 500 earnings?
A stronger dollar reduces the dollar value of foreign sales, so reported earnings of multinationals fall relative to constant currency results; in the second quarter of 2026 the effect was the opposite, with currency adding 1 to 2 points to growth at Coca-Cola, P&G and J&J because the euro was stronger than a year earlier [1][2][3].
What is the difference between reported and constant currency growth?
Reported growth uses actual exchange rates, while constant currency or operational growth removes translation effects; Microsoft, for example, grew fiscal 2026 revenue 18% reported but 16% in constant currency [4].
Which companies benefited most from currency in the second quarter of 2026?
Among the examples reviewed, Coca-Cola had the largest benefit with a 2 point tailwind to both net revenue and comparable EPS, and it raised its full year EPS currency tailwind estimate to about 3% [1].
Why do earnings show a currency tailwind if the dollar index is flat in 2026?
Earnings compare against the same quarter a year earlier; the euro was about 2% to 7% higher than in the second quarter of 2025 even though the Fed's broad dollar index was almost unchanged year to date at 119.70 on July 31, 2026 [5][6].
Sources & References
- [1] The Coca-Cola Company: Second Quarter 2026 Results (July 28, 2026)
- [2] Procter & Gamble: Fourth Quarter and Fiscal Year 2026 Results (July 29, 2026)
- [3] Johnson & Johnson: Q2 2026 results and raised 2026 outlook (July 15, 2026)
- [4] Microsoft: Fourth Quarter Fiscal Year 2026 Results (July 29, 2026)
- [5] DataPorium Forex: monthly EUR/USD and USD/JPY exchange rates
- [6] FRED: Nominal Broad U.S. Dollar Index (DTWEXBGS), daily data, Federal Reserve H.10
