S&P 500 Expected to Post Strong Q1 Earnings Growth
Chicago, IL – April 3, 2025 – Zacks Director of Research Sheraz Mian reports, “Total 2025 Q1 earnings for the S&P 500 index are anticipated to rise by +5.9% compared to the same period last year, driven by +3.9% higher revenues.”
Analyzing the Upcoming Q1 Earnings Season
This excerpt comes from this week’s earnings Trends report. For the complete report featuring detailed historical data and estimates for current and future periods, please Click here>>>
Key Points on Earnings Trends
- The expected +5.9% earnings growth for the S&P 500 in Q1 2025 follows a strong +14.1% growth with +5.7% revenue growth in the previous quarter.
- Since the beginning of the quarter, Q1 earnings estimates have gradually decreased from an initial expectation of +10.4% growth in January 2025.
- For the entire calendar year 2025, S&P 500 earnings are projected to grow by +9.6%, with 12 of the 16 Zacks sectors anticipating positive earnings growth. Sectors expected to see double-digit growth include Aerospace (+53.3%), Consumer Discretionary (+19.4%), Medical (+17.2%), and Technology (+12.1%).
- The “Magnificent 7” group is expected to deliver a +12.6% increase in earnings, alongside +9.3% higher revenues. Excluding this group, other S&P 500 companies anticipate an earnings increase of +8.7%, improving from +4.0% growth in 2024 and a decline of -5.1% in 2023.
Challenges for the Magnificent 7 Stocks
Recently, the Magnificent 7 stocks have faced a downturn, particularly with increasing capital expenditures highlighted by the DeepSeek breakthrough, which has caused market unease.
Meta Platforms (META) stands out as the only group member nearing positive territory in 2025, while Tesla (TSLA) suffers substantially, losing nearly a third of its value.
The remaining group members, placed between Meta and Tesla, include Nvidia (NVDA) and Alphabet (GOOGL) on the lower end. In contrast, Microsoft (MSFT), Amazon, and Apple rank in the upper half.
While it is tempting to attribute Tesla’s struggles to Elon Musk’s political activities, fundamental issues such as the company’s exposure to China and the evolving competitive landscape within the electric vehicle sector also need consideration. Apple, similarly, faces significant risks tied to China and trade policies.
For the five remaining members of the group, their fortunes are closely linked to market sentiment surrounding artificial intelligence. Given the considerable investments into AI, these stocks are particularly exposed to recent pressures.
Earnings Outlook for the Magnificent 7
One reason for the earlier success of the Magnificent 7 was their robust earnings capacity and strong growth trajectory. Last year, earnings projections for this group were consistently favorable, prompting analysts to increase their forecasts.
Recent analyses indicate that the outlook for the group has shifted to a less positive stance than in previous months.
In Q1 2025, earnings for the Magnificent 7 are anticipated to increase by +13.1% with +11.7% higher revenues, a significant drop from their +31.0% earnings growth on +12.8% revenue growth in the preceding quarter.
For 2025 as a whole, the expectation is for a +12.6% earnings increase with +9.3% grew revenues, following a +40.4% earnings surge alongside +16.8% revenue growth in 2024.
Overall, the Magnificent 7 are projected to generate $555.7 billion in earnings, up from the previous aggregate of $493.7 billion in 2024.
The flattening trend in revisions reflects recent developments with Tesla, Apple, and Meta, while the broader outlook for the remaining group members remains largely positive.
Continuing Growth in the Tech Sector
The Tech sector has demonstrated strong growth recently, continuing this trend into Q1. Tech earnings are projected to increase by +12.6% compared to last year, accompanied by +10.6% revenue growth, marking the seventh consecutive quarter of double-digit earnings growth.
This projection follows a +26.2% earnings growth with +11.3% higher revenues from Q4 2024.
The Tech sector has consistently experienced an improving earnings outlook, with estimates rising over the past year. Nevertheless, recent data indicates a modest decline in estimate revisions for Q1, although projections remain overall positive for all of 2025.
The Big Picture on Earnings
Total
S&P 500 Earnings Forecast Shows Growth Amid Sector Adjustments
S&P 500 earnings for the first quarter of 2025 are projected to increase by +5.9% compared to the same period last year, with revenues expected to rise by +3.7%.
Adjustments to Sector Estimates
Since the start of the quarter, earnings estimates have been revised downward. A broad-based trend is emerging, with estimates for 14 of the 16 sectors falling since January. The Medical and Construction sectors are the exceptions, where estimates have increased. Notably affected by revisions are sectors such as Conglomerates, Aerospace, Basic Materials, and Autos. Interestingly, the Tech sector, which has previously shown resilience, is also facing downward adjustments.
Future Expectations Amid Economic Factors
The outlook anticipates double-digit earnings growth for each of the next two years. This growth is expected to broaden among various sectors, moving beyond the narrow base seen recently. However, it is essential to remain cautious; expectations may shift downward as the impacts of slowing U.S. economic growth and tariffs begin to appear in corporate profitability.
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