But the 69th annual list also uncovered a funny thing on corporate balance sheets. Revenues hit a record high, but profits fell—by a lot. Amid an economic climate full of doom-mongering about a coming recession, a commercial real estate “apocalypse,” and a debate about “greedflation” being the reason for soaring prices, the Fortune 500 snapshot from 2022 is trying to tell us something. But is it a sign of an imminent recession or is this just a return to normal?

After corporate profits surged in the second half of 2020 and throughout 2021, sparking outrage from consumers struggling to cope with rising cost of living, things took a bearish turn last year. The Federal Reserve jacked up interest rates to slow the economy and fight inflation, leaving the corporate sector with a spate of indigestion, as companies raked in record revenues, but profits tanked.

In 2021, Fortune 500 companies earned $1.84 trillion in profits on $16.1 trillion in revenue. But last year, although revenue rose to $18.1 trillion, profits dropped roughly 15% to $1.56 trillion.

The trend came as rising interest rates increased borrowing costs for many Fortune 500 companies during the year, helping to chip away at margins even as inflation allowed for higher prices. The ailing tech sector also saw its profits sink sharply amid the e-commerce slowdown and return to office trend. Although big tech companies continue to dominate the Fortune 500, 2022 was a down year in terms of margins, which caused the combined annual profit of Microsoft, Meta, Apple, Amazon, and Alphabet to fall roughly $77 billion compared to the year before. Amazon alone contributed a net loss of $2.7 billion in 2022, compared to a net profit of $33.3 billion in 2021. 

It’s not just Fortune 500 companies that are experiencing falling profits, either. Total after-tax U.S. corporate profits fell roughly 12% between their peak in the second quarter of 2022 and the first quarter of this year, according to data from the St. Louis Federal Reserve. 

Still, despite the worrying profit trend, which comes amid consistent recession predictions from Wall Street, economists interviewed by Fortune argued it is merely an example of the natural ebbs and flows that occur in earnings during business cycles and we shouldn’t be too concerned—at least for now.

“There’s a standard cyclical component to profits,” Brian Albrect, chief economist at the International Center for Law & Economics, a non-profit, non-partisan research center, told Fortune. 

Despite the jarring statistical incongruity, he said, “this is business as usual for the economy,” arguing that corporate profits are returning to trend, just like they typically do as business cycles mature. But to really understand why profits are falling you have to rewind to the brief but devastating recession caused by the pandemic just three years ago.

The natural profit cycle? 

Profits tend to rise as economies come out of recessions, according to Albrecht, because demand increases and supply can’t keep up. That, in turn, drives up prices and enables corporations to increase margins. 

John Leer, chief economist at the business intelligence firm MorningConsult, explained that this is exactly what happened as the U.S. emerged from the pandemic-induced recession in 2020. “In 2020 and 2021, you had companies out there saying, ‘We’re in a period of elevated demand, inflation is high, it’s likely to go higher, let’s make sure we set our prices accordingly.’ And they were able to pass along all those elevated costs to consumers and to businesses, which drove margins [higher],” he told Fortune. 

Now though, with inflation falling from its four-decade high in June of last year, and economic growth slowing under the weight of higher interest rates, Leer says we’re headed towards the natural “margin compression” period of the business cycle.

“And that’s driven by the same things that made the profits go up, coming down,” he said. “You’ve got weaker demand, realized and expected, you’ve got slower inflation, realized and expected, and less ability for businesses to pass along elevated costs to consumers.”

Investment banks and hedge funders have consistently warned about the potential for profits to drop as the economy slows under the weight of rising interest rates. The billionaire investor and hedge funder Stanley Druckenmiller said just this week that he believes corporate profits could fall another 20% to 30%.

Both Leer and Albrecht said they also believe profits will continue to sink this year, but not to the extent that many forecasters on Wall Street are claiming.

“I think it would take a real mess-up from the Fed to get that kind of drop in profits,” Albrecht said, arguing that scenario is only likely if Fed officials decide to jack up rates dramatically from here. 

Are fading profits a sign of an imminent recession?

There’s been no shortage of recession forecasts over the past few years. Economists, billionaire investors, and even former Federal Reserve officials have all repeatedly warned that the U.S. economy is on shaky ground. But despite the pessimistic predictions, the unemployment rate is stuck near pre-pandemic lows, U.S. GDP continues to rise, and stocks just entered a bull market. 

Still, some fear that fading corporate profits could be a more concrete sign that a recession is coming soon. And there’s certainly evidence that corporate profit declines have preceded recessions in the past—they peaked in the third quarter of 2006, for example, more than a year before the Great Recession officially began in December of 2007. And the same thing happened in the fourth quarter of 1997, more than two years before the dot-com bubble blow up caused a recession in early 2001.

Albert Edwards, a global strategist at the French investment bank Societe Generale, explained in a Thursday research note that falling profits do “typically precede recessions.”

“Near the top of economic cycles, rising costs result in falling US corporate profits (and profit margins), prompting companies to cut investment spending and jobs, thereby triggering recessions,” he explained.

However, Edwards believes that “greedflation”—the idea that businesses’ used the pandemic, broken supply chains, and the war in Ukraine as an excuse to raise prices more than their costs actually increased—may be delaying the onset of the recession “by allowing companies to more than compensate for higher costs and slowing volumes through unprecedented hikes in prices and thus expanded margins.”

Both Leer and Albrecht, however, stand firmly against the Greedflation theory. They believe the rise of profits in 2020 and 2021 was purely a result of supply and demand imbalances in an economy that was flooded with fiscal and monetary stimulus while supply chains were fractured.

But, like Edwards, Albrecht noted that corporate profits’ sharp rise in late 2020 and 2021 could mean that the recent drop in profits is merely a return to trend, and a recession isn’t imminent.

“Very rapidly falling profits are a sign of recession, but I don’t know if this qualifies as that. You have to remember exactly how dramatic the profit rise was in 2020 and ‘21. So I’m not immediately concerned. They’re falling from that extreme peak. Maybe they’re just falling back to the normal business cycle setup,” he said.

Leer, however, said that he believes businesses should start planning for a recession amid falling corporate profits based on this history, even if it isn’t an imminent threat.

“There will be a recession at some point. It’s like asking, ‘Is it gonna rain?’” he said. “Well, eventually, yes, it’ll rain.? I think the real question is, ‘Should you bring your rain gear?’ And I think we’re headed to that spot where the probability of a recession over the next 12 months is high enough where it makes sense for businesses to start planning accordingly.”