Earnings season wrapping up on a high note
Second quarter earnings season is winding down, but earnings are up, and better than expected. Despite some potentially concerning signals from the real economy, including muted job gains, and possible seasonal volatility, we remain constructive on equities. A positive second quarter earnings season strengthens our conviction.
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Published on 11 August 2025
Second quarter earnings season is winding down, and results have delighted many investors. More than 90% of S&P 500 companies have already reported and 82% beat estimates, the highest rate in four years. Once all data comes in, earnings are expected to have grown 11.7% compared to 4.9% projected at the end of June.
Additionally, estimates for the full year have also improved; consensus estimates call for 10.2% annual earnings growth, up from 8.7% in June. Despite signs of potential weakness in the real economy and job market, earnings have been better than anticipated.
Historically, August and September have been seasonally challenging months, suggesting we could see an increase in volatility in the near term, but the ongoing strength of earnings instills us with confidence in equity performance over the long term. We also remain positive on the artificial intelligence (AI) growth story, which bolstered the results of Magnificent Seven companies this past quarter. The innovation’s benefits are not only affecting technology companies; AI is driving margin expansion and productivity enhancements across many other sectors too, further supporting our constructive stance on the future outlook of the U.S. equity market.
787959 Exp : 11 August 2026
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Although companies benefiting most directly from AI-related capital spending are the main drivers of higher earnings, strength is no longer confined to that group. Earnings across the broader market remain solid and are expected to grow more than 10% this year and next, suggesting the risk of concentrated market leadership may not be founded.
After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.
Global equities have risen an annualized 11% since 2020 despite repeated shocks, as resilient growth and earnings have helped markets recover from periods of volatility. While the U.S.-Iran conflict poses near-term inflation and growth risks, markets remain constructive as earnings expectations continue to improve.
Rising earnings estimates continue to support equities despite geopolitical and macroeconomic uncertainty. With profit growth broadening across S&P 500 industries, resilient corporate earnings underpin our constructive outlook for the stock market.
