Chicago, IL – May 15, 2025 – Zacks Director of Research Sheraz Mian says, "Total Q1 earnings for the 456 S&P 500 members that have reported results are up +12.1% from the same period last year on +4.5% higher revenues."
Making Sense of the Evolving Earnings Picture
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, please click here>>>
Here are the key points:
Total Q1 earnings for the 456 S&P 500 members that have reported results are up +12.1% from the same period last year on +4.5% higher revenues, with 73.9% beating EPS estimates and 62.1% beating revenue estimates.
We continue to believe that this earnings season was less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the evolving macroeconomic and public policy backdrop. To that end, management commentary has largely been reassuring despite the uncertainty.
Estimates for the current period (2025 Q2) have been under pressure, with bigger declines in estimates compared to other recent post-COVID periods. That said, estimates for the Tech sector have notably stabilized lately.
For 2025 Q2, total S&P 500 earnings are expected to be up +5.9% from the same period last year on +3.8% higher revenues. Q2 estimates have been steadily coming down, with the magnitude and breadth of negative estimate revisions greater than had been the case in the comparable periods of other recent quarters.
What’s Happening to 2025 Q2 Earnings Estimates?
The start of Q2 coincided with heightened tariff uncertainty following the punitive April 2nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters.
The expectation at present is for Q2 earnings for the S&P 500 index to increase by +5.9% from the same period last year on +3.8% higher revenues.
While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of the Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters.
Since the start of the quarter, estimates have come down for 13 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors.
Estimates for the two largest earnings contributors to the index – Tech & Finance – have declined since the quarter began.
Tech sector earnings are expected to be up +12.4% in Q2 on +9.8% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably reversed course in recent weeks, as we have been flagging lately.
Hard to tell at this stage how durable this reversal in the Tech sector’s estimates will prove to be, but the favorable turn in the sector’s Q2 estimates at least proves that the shift to the annual growth pace isn’t solely a function of strong positive Q1 earnings releases, particularly from the Mag 7 players. We can see this trend reversal in the estimates for Microsoft MSFT, Alphabet GOOGL and Meta META.
The current Q2 Zacks Consensus EPS estimate for Alphabet of $2.12 is down from $2.15 on April 4th, but is up from $2.08 on April 25th and $2.07 a week prior to that. Similarly, for Meta, the current Q2 EPS estimate of $5.84 is down from $5.94 on April 4th, but up from $5.70 on May 2nd and $5.51 on April 25th. The revisions trend for Microsoft is similar, though the company’s current Q2 estimate is modestly higher relative to where it stood at the start of April.
You can rest assured that we will be closely monitoring the Tech sector’s revisions trend in the days ahead.
The Earnings Big Picture
While estimates for this year have started coming down lately, there haven’t been a lot of changes to estimates for the next two years at this stage.
Given all-around worries about the economy’s growth momentum, it is reasonable to expect these estimates to be lowered further in the days ahead as the tariffs impact starts showing up in data.
The modestly negative GDP read for the first quarter of the year primarily reflected the anticipatory effects of the trade regime, with importers stocking up on supplies ahead of the new levies taking effect.
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