In the second quarter, earnings are expected to grow by 5% compared to last year, thanks to a 3.9% rise in revenues. This growth is the slowest we’ve seen since a 4.3% increase in the third quarter of 2023. Earnings estimates for Q2 2025 are falling, with significant cuts in 14 out of 16 Zacks sectors. The Aerospace and Utilities sectors are the only exceptions showing increases. Meanwhile, the Tech and Finance sectors—making up over 50% of the S&P 500 earnings—are also experiencing estimate cuts, though Tech has stabilized recently.

Easing Tariff Uncertainties

The reduction in tariff uncertainties has helped stabilize Tech sector revisions. Analysts had initially lowered their estimates because of harsh tariff announcements, but expectations for these tariffs have eased. For 2025 and 2026, S&P 500 earnings are expected to be $253.84 and $286.87, respectively. This week, key companies like FedEx, Nike, and Micron will report their earnings. FedEx, reporting on June 24th, anticipates $5.94 per share with revenues of $21.7 billion. Nike, on June 26th, expects an 89.1% decline in EPS and a 15.4% drop in revenue. Micron forecasts earnings of $1.57 per share on $8.81 billion in revenue, showing significant growth. So far, nine S&P 500 companies reporting results for the May quarter have shown 2.4% earnings growth and revenue increases of 7.9%. While a 5% rise in second-quarter earnings is projected compared to last year, the pace of growth is clearly slowing. This slow pace, along with a 3.9% revenue increase, makes it the slowest quarterly earnings growth since Q3 of 2023. The slowdown suggests softening demand in several industries and margin pressure, which weren’t as pronounced in earlier quarters. Revisions to outlooks indicate waning confidence for next year. We’re seeing reductions in estimates for Q2 2025 across the board, with 14 out of 16 Zacks sectors receiving lower earnings forecasts. This widespread adjustment highlights the seriousness of the situation—it’s not just a few sectors affecting it. The Finance and Technology sectors, which together comprise over half of the total S&P 500 earnings, are also seeing cuts. However, Tech has shown some stability recently, partly due to improved clarity around tariffs. Analysts had downgraded projections out of fear regarding tariffs on key imports in the semiconductor and device manufacturing sectors. But now that such trade actions seem less likely—or at least delayed—those concerns have eased. This situation shows that initial reactions can sometimes overestimate the likely impact of uncertainty. The current shift in sentiment is not due to rapid improvements in fundamentals but rather a lessening of past concerns.

Looking Ahead to 2025 and 2026

Looking ahead, experts forecast S&P 500 earnings for the full year 2025 at $253.84 per share, increasing to $286.87 in 2026. While these figures are decent, the recent downgrades indicate potential challenges ahead, especially if GDP expectations weaken or inflation rises again. For those tracking market movements, changes in forward multiples during earnings season will be important indicators. More companies will report in the next two weeks, and even this week features some significant names that could impact market indices. FedEx will report on the 24th, projecting $5.94 EPS on $21.7 billion in sales. This will provide insights into trends in goods movement and broader industrial demand. Nike’s report two days later will shed light on consumer spending trends, although its expected 89.1% EPS decline and 15.4% revenue drop paint a sobering picture against the optimism seen in broader market valuations. The key question is whether this trend is isolated or part of a larger systemic issue. On the other hand, Micron is positioned positively, projecting earnings of $1.57 per share on nearly $8.81 billion in revenue, with both growth figures standing out in line with rising AI-related hardware spending. Among the companies that have reported fiscal results for May so far, average earnings increased by 2.4%, and revenues rose by 7.9%. While this offers modest support, it is not enough for those hoping for robust growth in the second half. Mixed results can create quick trading opportunities, but they also reflect limited conviction as positioning can change rapidly based on results and guidance. Overall, with slower growth and deteriorating forward guidance in major sectors, risks are being more clearly priced in, especially in the options market. Traders should pay close attention to implied volatility around reporting dates and how earnings beats or misses affect stock prices. Unusually large or small price movements can indicate whether market sentiment is fragile or just awaiting stronger data confirmation. Create your live VT Markets account and start trading now.

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