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Analysis

A Look Ahead To Q2 25 US Earnings Season

Michael Brown
Michael Brown
Senior Research Strategist
Jul 2, 2025
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Earnings season is about to get underway once again, with the banks getting things going in mid-July. While trade and tariff uncertainty persists, the underlying US economy remains solid, with participants seeking confirmation of this in upcoming reports, as well as guidance as to how ongoing policy volatility may impact corporates in the quarters ahead.

According to estimates compiled by FactSet, aggregate earnings growth for the S&P 500 is expected at 5.0% YoY in the second quarter which, if realised, would mark the 8th consecutive quarter of growth, albeit also the slowest such pace since the final quarter of 2023. In terms of revenue, growth is seen at 4.2% YoY, if realised marking the 19th straight consecutive quarter of growth.

Coming into earnings season, though, at least per traditional valuation metrics, the benchmark S&P 500 remains ‘overvalued’, with the forward 12-month P/E ratio sitting at 21.9, above both its 5- and 10-year averages.

Preview

Drilling down to a sectoral level, expectations are a touch more mixed.

Six of the index’s eleven sectors are set to report annual earnings growth, with Communication Services and Information Technology leading the way. On the other hand, Energy is set to lead YoY earnings declines. Revenue growth expectations are considerably more positive across the board, however Energy is again seen lagging here.

Heading into reporting season, though, guidance has, as usual, trended in a negative direction, with earnings estimates having fallen around 4.1% through the second quarter, considerably above the 10-year average. This, though, shouldn’t be especially concerning, given the long-standing tendency of firms to ‘massage and beat’ those depressed expectations.

Consequently, along with the figures themselves, market participants will also pay close attention to guidance that firms issue along with their reports, particularly considering the still-uncertain macroeconomic environment, and ever-changing tariff landscape. As has been the case for some time now, the bar for stocks to unlock post-earnings upside is a relatively high one, requiring both beats vs. consensus, and guidance upgrades, for durable rallies to take place.

As usual, earnings season will get underway with the major Wall St banks kicking things off, acting as a bellwether for the remainder of the season. The outlook here remains somewhat mixed, with M&A volumes still relatively subdued given the uncertain environment, despite having picked-up from the slump in Q1. At the same time, the Fed’s ‘wait and see’ approach on rates should see NIMs remain solid, though the degree of provisions made will be worth watching closely, given increasing jitters over the potentially fragile state of the labour market.

Preview

Besides the banks, earnings from the tech megacaps will also be closely watched, even if the ‘magnificent seven’ term is being thrown around a lot less this year, than in 2023 and 2024.

The group’s performance has been incredibly mixed this year, nothing like the market dominance seen in recent times, with stock-specific factors playing a much more significant role – Tesla driven lower by the ongoing ‘Trump vs. Musk’ feud; Apple facing headwinds amid incredibly sluggish progress on the AI front; while, in contrast, Meta, Microsoft and Nvidia have all performed well, as they continue to make the most of momentum behind the AI theme, and in the latter case, an apparent never-ending amount of increasing CapEx.

Preview

Taking a step back, earnings season will be a pivotal test for the market, with both the S&P 500 and Nasdaq 100 entering reporting season at, or very close to, record highs. The bull case to date has been built on cooler trade rhetoric, strong underlying economic growth, and a solid pace of earnings growth. Were this latter pillar to be threatened, some near-term headwinds to risk could emerge, though any weakness is likely to be seen as a buying opportunity.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

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