February In Review: What’s Old Was New (Again)

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This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies.
For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The ASX200 rallied strongly in February, as rotation into Value and out of Growth continued. Financials and Resources moved sharply higher. Technology encountered more selling pressure.

• The two largest ASX200 sectors by market cap led a 4.1% total return for the ASX200
• Earnings results ahead of expectations, and upgrades ensued higher valuations
• AI is no longer a theoretical discussion, it became a game changer for companies, both good and bad

By Danielle Ecuyer

Blue Chip majors do the heavy lifting on earnings beats

The big rotation out of growth into value continued unchecked over February, coinciding with what Morgan Stanley describes as the strongest reporting season in a decade outside of the post-covid recovery in 2021.

What began around August last year has now become a defining market feature, with large-cap “traditional” stocks reclaiming leadership with conviction.

Think the two BIG Australians, CommBank ((CBA)) and BHP Group ((BHP)), which have reclaimed their positions as the two largest market capitalisation-weighted stocks on the ASX and now represent a record weight over 20% of total market capitalisation.

Before the guffaws of “don’t be so ageist” emerge regarding “boomer stocks”, to the credit of both blue chip companies, their results came in well ahead of expectations.

The market duly rewarded the ‘beats’ with earnings upgrades, underpinning rallies in both share prices of some 17%-18%.

Once upon a time, investors could only dream of such capital returns over two or three years.

To the chagrin of value skeptics, CommBank contributed 173.9 basis points to the ASX200’s total return, despite most analysts continuing to decry the stock’s premium valuation.

BHP, which has continued to be re-rated, advanced in hot pursuit, generating 147.3 basis points.

Following in succession were National Australia Bank ((NAB)) at 64.5, Westpac ((WBC)) at 47.6 and ANZ Bank ((ANZ)) at 36.8 basis points, thereby setting the scene for Banks up 13.3% and Mining up 9.4% over the month, Macquarie explains.

Australia’s two major index weighting sectors had a fabulous month in February and therefore so did the index.

Once market darlings continued to fall from grace

The ASX200 index returned 4.1%, including dividends, reaching a fresh high of 9199 points, undeterred by a -13% decline in Healthcare.

That sector retreated on the back of ongoing outflows and disappointment in once-favourites CSL ((CSL)) down-19%, Pro Medicus ((PME)) down -31%, and Cochlear ((COH)) down -28%.

Ex-dividends, the ASX200 gained 3.7%. Backing out the Resources index, the ASX still rose 2.4%.

As Morgan Stanley points out, earnings ‘beats’ came in at 2.4x more than misses, helping explain the strength in the market.

On UBS’s calculations, beats exceeded misses by a ratio of 2:1, with the average company receiving an earnings upgrade of 0.4%.

Macquarie noted EPS beats for the interim results (1H26) of up 12%, with ASX100 Industrials delivering a more positive surprise of 23% versus Small Industrials at 8%.

Digging deeper, Macquarie flags management earnings guidance as a key positive, with net upgrades of 32%, the strongest in years.

All of these positives reflect both the resilience of domestic economic growth and conservative positioning by portfolio’s into reporting season.

Large caps were the clear winners, Morgan Stanley highlights, outperforming small caps by 7.3%, which is 2.6 standard deviations above the historical average.

Small wasn’t so beautiful this month

If small caps are more representative of the domestic economy, perhaps the canary in the coal mine is offering insight into how businesses are traveling ex financials and resources.

Consumer discretionary fell -10% over the month, the third worst-performing sector after Healthcare at -17.1% and Technology at -12.2%.

Morgan Stanley notes retailer discounting and interest rate impacts as key reporting season themes, which clearly intersect with discretionary underperformance. Other recurring themes included self-help and cost-out initiatives, AUD implications with a higher currency weighing on foreign earners, AI disruption and what Macquarie describes as a clear capex economy.

Artificial Intelligence became the elephant in the room

It was in AI where dispersion became most visible. Macquarie observes an AI “tipping point” was passed this earnings season, with AI exposure now an integral macro factor driving earnings expectations and valuations.

The broker has developed a “Darwin Framework”  that classifies all ASX300 stocks by AI exposure.

Enablers, which build AI, represent 21% of market capitalisation. Adopters, which accelerate growth using AI, represent 51%.

Neutral classifications account for 22%, while the Disrupted comprise 6%, companies that use AI but are also challenged by it, with Block ((XYZ)) cited as an example following a -50% workforce reduction while integrating AI features.

The performance differential was stark. Enablers achieved EPS surprises of 23% and net FY26 earnings upgrades of 27%. The Disrupted accounted for just 3% of beats and saw downgrades of -14%, with AI Enablers outperforming the Disrupted by around 20% in 2026 year-to-date.

Technology fell -9.1% over the month, and some stock moves were not for the faint-hearted, particularly after a six-month-plus rotation already into materials and financials.

Total return for ASX-listed Technology is now down -37% over the last six months, while Materials are up 43.3%.

Terms such as “SaaSpocalypse” have emerged to describe the flight from software, online classifieds and other non-hardware names perceived as vulnerable to AI agents.

Volatility and Factor (Value/Momentum) took the baton 

Volatility was (yet again) a defining feature of February. Companies that missed expectations experienced, on average, a -5% decline in share price. There were plenty of stocks taking the express elevator up, countered by others taking the express elevator down.

UBS exclaimed “wild share price moves were again a feature” with twelve ASX100 companies experiencing absolute share price moves over 10% on the day results were announced.

February was not for the faint-hearted.

From a factor perspective, leadership shifted again over the month. Value faded toward the finish line while Momentum strengthened.

Macquarie details Value outperformed Growth by 9.4%, reflecting the ongoing switch out of Technology into Resources.

Momentum rose 4.6%, suggesting Value has effectively become Momentum in Australia. This aligns with global trends, with Value outperforming Growth by 5.6% in the US.

Australia leads global equities in February

Taking a top-down global view, the MSCI Australia index rose 7.7% in USD terms versus MSCI World Developed Markets up 0.8%. The Nikkei225 index rose 9.1%,  with FTSE100 up 1.4% and MSCI Global Emerging Markets up 6.1%. The S&P500 slipped -0.8%.

Australia remained true to form, outperforming when commodities are strong. The Bloomberg Commodity Index advanced 10% in February, Brent Crude rose nearly 14%, yet Energy stocks gained just 2.8%.

The ASX200 12-month forward price-to-earnings multiple now sits at 18.6x, above the long-term average of 14.8x, with aggregate consensus EPS growth estimates of 13.6% and 9% for FY26 and FY27, respectively, Morgan Stanley explains.

UBS highlights the average company received a 0.4% upgrade to 2026 earnings, tempering broader valuation concerns.

Another notable takeaway from UBS was retailer trading updates indicating consumers remain “largely” intact, aligning with its economists’ view the RBA still has more work to do on rates.

UBS forecasts another 25bps rate hike in May and doesn’t necessarily think that’s where this year’s tightening will stop.

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More reading about February results: https://fnarena.com/index.php/2026/03/04/rudis-view-a-season-of-large-cap-winners/

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

Do note: the charts above have already moved into early March (up until yesterday).

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