These charts show why stocks keep rallying. Profit margins are the highest on record

S&P 500 companies are keeping more profit from every dollar in sales than ever before, providing another tailwind for stocks.

Using FactSet data, John Butters, senior earnings analyst and vice president at FactSet, showed that the S&P 500's blended net profit margin is running at 16.9% for the second quarter. That's up from 14.8% in the first quarter and 12.9% a year ago, and well above the five-year average of 12.4%.

Net profit margin is the percentage of revenue companies get to pocket after they have paid all expenses.

If that 16.9% figure holds, it would be the highest net profit margin since FactSet began tracking the metric in 2009, Butters notes.

Alphabet and Amazon are the biggest contributors to the S&P 500's record-high net profit margin, Butters said.

Alphabet reported operating margin of 34% in the second quarter, up from 32% a year earlier. The Google parent also posted a $98 billion gain in other income , primarily from unrealized gains on equity securities. Amazon recorded other income of $53.4 billion on a net basis largely tied to its investment in Anthropic. The e-commerce and cloud giant also posted operating margin of 13.7% in the second quarter, up from 11.4% a year ago.

Even after excluding Alphabet and Amazon, the S&P 500 margin still looks impressive at 15%, which is also a record and marks the highest net profit margin reported by the index dating back to 2009.

At sector levels, margins have been improving across most of the market.