Q1 Earnings Show Robust Growth Amid Economic Uncertainty
Note: The following is an excerpt from this week’s earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods.
Key Earnings Highlights
- Total Q1 earnings for 419 S&P 500 companies reporting results are up +12.2% compared to last year, driven by +4.1% higher revenues. 73.7% exceeded EPS estimates, while 61.8% surpassed revenue forecasts.
This earnings season highlights a significant commentary on economic difficulties rather than just company performance. The uncertain macroeconomic environment is leading to a downward trend in estimates for future reporting periods.
- For Q2 2025, analysts anticipate a +6.4% increase in total S&P 500 earnings and +3.9% growth in revenues. However, estimates are being revised down more aggressively than in previous quarters.
- Interestingly, Tech sector earnings estimates have seen an uptick in the past two weeks after experiencing initial declines.
Current Estimations and Trends for Q2 2025 Earnings
The beginning of Q2 coincided with rising uncertainty over tariffs due to the April 2nd announcements. Although the implementation of these tariffs has been postponed for three months, the concern has impacted earnings projections for both current and upcoming quarters.
As of now, Q2 earnings for the S&P 500 index are expected to grow by +6.4% compared to last year, with revenues rising by +3.9%. Below is a chart depicting how earnings growth expectations for Q2 have changed since the start of the year.
Image Source: Zacks Investment Research
Adjustments to estimates are typical; however, the current extent of Q2 estimate reductions is more significant than seen in previous quarters. Notably, 13 of the 16 Zacks sectors have lower estimates, especially in Transportation, Autos, Energy, Construction, and Basic Materials.
Even the two biggest earnings contributors—Tech and Finance—have noted declines since the quarter began. For the Tech sector, earnings are projected to increase by +12.8% in Q2, alongside +9.9% higher revenues. While these expectations are lower than at the beginning of April, recent days have shown a positive revision trend.
Image Source: Zacks Investment Research
Last week’s report pointed out a notable turnaround in the Tech sector’s revision trend. This is reflected in the full-year earnings growth expectations for the sector, which are illustrated in the chart below.
Image Source: Zacks Investment Research
It remains to be seen how sustainable this upward trend in Tech estimates will be, but the positive revisions suggest that Q2 growth isn’t solely dependent on the results of the major players, often referred to as the “Magnificent Seven,” who reported last week.
Current Q2 Zacks Consensus EPS estimates for Alphabet stands at $2.12, down from $2.15 on April 4th but up from $2.08 as of April 25th. For Meta, the Q2 EPS estimate is currently $5.84, down from $5.94 on April 4th but up from $5.70 on May 2nd. Microsoft shows a similar trend, with slight improvements in its current estimates compared to the start of April.
This evolving dynamic in Tech sector estimates will be an area to watch closely.
Overall Earnings Perspective
The chart below illustrates Q1 2025 earnings expectations alongside achievements from the previous four quarters and forecasts for the next three.
Image Source: Zacks Investment Research
The following chart depicts the annual earnings outlook for the S&P 500 index.
Image Source: Zacks Investment Research
While this year’s estimates have begun to trend downward, projected estimates for the next two years remain relatively stable. The chart below illustrates how quickly this year’s estimates have been adjusted downward.
Image Source: Zacks Investment Research
Given ongoing concerns about economic growth momentum, further downward adjustments are likely as the effects of tariffs begin to manifest in economic data. The GDP decline in the first quarter was influenced by anticipatory reactions to trade policies, with companies preparing for the upcoming tariffs.
