At the same time, a clear divergence is visible on both sides of the Atlantic: in the U.S., results were very strong, while in Europe they were decent considering the circumstances. Moreover, in Europe the financial sector saved the season, as consumer-facing cyclical sectors (such as apparel, home furnishings, automotive or tourism) recorded negative financial results (-11.2% y/y).
- Despite rising tariffs and weakening demand in Europe, companies showed remarkable resilience in the Q3 earnings season. Common to both sides of the Atlantic: the best results were achieved by the financial sector, clearly outperforming industry. Banks benefited from still elevated interest rates, which boosted net interest margins and lifted profits. Industry was supported by higher defense and aerospace spending. The consumer sector, however, disappointed on both continents.
- U.S. companies stood out as clear leaders — thanks to frontloading (building inventories ahead of tariff implementation) and price cuts by foreign manufacturers. As many as 82% of American firms exceeded earnings expectations (revenues: +8.1% y/y and EPS: +16.8% y/y). Investment spending rose to USD 100 billion, driven by the artificial-intelligence boom, which has evolved from a niche topic to a central theme during earnings calls across various industries.
- The outstanding results of American (large) companies also had their downsides, including declining year-on-year revenues in sectors such as paper and wood (-8.7%), maritime transport (-1.3%) and durable goods and apparel (-0.7%). The strong overall performance (and especially the significant increase in EPS) was driven not only by stronger-than-expected demand but also by improved operational efficiency reflecting widespread margin improvements.
- European companies, meanwhile, lagged behind but still outperformed rather moderate expectations according to Allianz Trade analyses, with EPS up +6.2% y/y despite a revenue decline of -1.2% y/y. The rise in average earnings in Europe was driven mainly by the financial sector (+11.4% y/y), which helped offset the -11.2% y/y decline in cyclical consumer goods.
- In Q4, a stronger euro, limited discretionary spending and unfavorable sectoral factors are likely to continue weighing on revenue (-1.8% y/y) and profits (-2.7% y/y). However, the outlook for key industries in the region is improving, and EPS growth forecasts for 2026 for the Stoxx-600 index have been revised upward from +12.6% y/y to +12.9% y/y.
- A sector crucial for Polish exports continues to underperform: cyclical consumer goods (including apparel, consumer products — such as furniture/household appliances/consumer electronics — cars, travel and leisure), which recorded the weakest results in the index. EPS in this sector fell by 11.2% y/y, a negative surprise of -5.6% relative to expectations.
Despite trade frictions, rising tariffs and weakening demand in Europe, companies demonstrated exceptional resilience in the Q3 earnings season. So far, around 80% of firms have reported Q3 results, and more than half exceeded expectations in both sales and profits, with American companies clearly in the lead. Cost-control discipline and strategic flexibility helped protect margins and sustain growth despite lingering political uncertainty. Executive sentiment was also much more optimistic than in 2024, approaching the highest levels last seen at the end of 2021 (chart 3), suggesting that supply-chain disruptions have largely eased and tariff-related concerns were mostly limited to the first half of the year.
USA: the technology boom lifts the entire market; operational efficiency improves, investments surge
In the United States, companies delivered strong, double-digit earnings growth, well above forecasts and driven by the massive-cap artificial-intelligence boom. In Q3 2025, S&P 500 earnings growth accelerated to +16.8% y/y, continuing the positive momentum from Q2 (+13.8% y/y) — see chart 1. After four consecutive quarters of double-digit EPS growth, the S&P 500 has returned to record profit levels and is on track for double-digit EPS expansion for the full year. Following the end of the reporting period, overall EPS growth far exceeded the ~+8.8% y/y expected at the start of the quarter, as 82% of companies beat earnings forecasts — far above the five-year average of ~75% — making this one of the strongest quarters in recent years and confirming that U.S. equities can perform well even in a slowing macroeconomic environment. According to Allianz Trade, technology remains the fastest-growing sector in the S&P 500, but growth was broad-based: financials, industrials, real estate and materials all posted EPS increases above +20%.
Revenue performance was solid as well: U.S. revenues rose 8.1% y/y in Q3, far above the 5.7% expected at the beginning of the season, with 78% of companies beating forecasts. All sectors posted positive revenue growth in Q3 within the index, though energy lagged slightly (+1.1% y/y), as lower prices weighed on results. Across the broader listed-company universe, some sectors reported year-on-year declines — especially paper and wood (-8.7%), maritime transport (-1.3%) and durable goods and apparel (-0.7%).
The large gap between revenue growth and EPS growth suggests that American companies benefited not only from healthy demand and persistent pricing power, but also from operational-efficiency gains reflecting widespread margin expansion. The strongest margin increases occurred in financials, industrials and real estate, while margins declined somewhat in healthcare, consumer staples and energy.
Chart 1: S&P 500 revenue and earnings-per-share growth (% y/y)
Sources: LSEG IBES, Allianz Research
Continuous growth in investment and AI-driven demand remains in focus, motivating big tech to deliver exceptional performance. The technology sector recorded the strongest increase in sales (+16.1% y/y) and earnings (+28.5%) within the S&P 500, supported by robust enterprise spending on cloud services and AI infrastructure. Capital expenditures rose to USD 100 billion from around USD 60 billion in Q3 2024 (USD 400 billion annually), highlighting the sector’s aggressive investment cycle alongside sustained profitability.
The artificial-intelligence boom, however, extends far beyond tech, evolving from a niche topic into a major talking point during investor meetings and corporate earnings calls across industries. Chart 2 shows that the number of AI mentions during earnings calls reached a record high last quarter, reflecting its growing strategic relevance for executives and investors. While tech firms remain the most active, sectors such as finance, consumer goods and energy increasingly emphasize AI’s role in boosting efficiency, automation and risk management.
This broad adoption underscores AI’s transformation into a critical driver of productivity, profitability and long-term competitiveness as firms prepare for 2026. However, AI-related concentration risk is growing, keeping investors cautious, with any failure to meet expectations carrying significant consequences.
Overall, while expectations for Q4 remain moderate (projected EPS growth of +8%) and full-year 2026 forecasts have been slightly revised downward (from +14.1% to +13.8%), U.S. companies remain on track for another strong year of double-digit profit expansion.
Chart 2: AI mentions in earnings calls and management-sentiment index
Sources: Bloomberg, Allianz Research
Europe: clearly weaker results than the U.S., but still encouraging – EPS beats expectations by +4.6%! Consumer sectors weigh on results
European companies delivered weaker results than their American counterparts, but still exceeded expectations. Higher tariffs and a stronger euro weighed on international sales, causing Stoxx-600 revenues to decline for the second time this year (-1.2% y/y in Q3) — see chart 3. The steepest declines were recorded in maritime transport (-15.1% y/y), energy (-7.2%) and basic materials (-5.9%), driven by lower transportation and commodity prices and weak industrial demand, affecting especially chemicals, paper & pulp, and metal & mining sectors (chart 4).
Still, strategic management, according to Allianz Trade, helped maintain earnings stability. With a +4.6% positive surprise, aggregate profits remained slightly positive in Q3 (+0.3% y/y). For the Stoxx-600, the outcome was even better: based on results from 73% of companies, EPS initially expected to be slightly negative rose to +6.2% y/y (chart 3), marginally exceeding the +4.0% recorded in Q2, as more companies outperformed expectations.
Sector leaders included financials (71% beating expectations), technology (52%) and industry (52%). Financials recorded the strongest profit growth in the region (+11.4% y/y), with banks benefiting from high interest rates, which boosted net interest income. Industry benefited from higher spending in aerospace and defense.
The cyclical consumer-goods sector (including apparel, consumer products, automotive and travel & leisure) delivered the weakest results in the index, with EPS down 11.2% y/y — a negative surprise of -5.6% — reflecting persistent weakness in consumer confidence that continues to limit discretionary spending. Retailers and leisure firms reported falling consumer outlays in Europe, while car manufacturers struggled with weak demand and rising competition from China.
Chart 3: STOXX-600 revenue and EPS growth (% y/y)
Sources: LSEG IBES, Allianz Research
Chart 4: EPS growth (X-axis) vs. revenue growth (Y-axis) in Q3 2025, Europe
Sources: LSEG Refinitiv (sector averages as of 13 November, with 77% of European companies having reported), Allianz Research
The macroeconomic context (especially trade tensions), stronger euro, weak discretionary spending and pressure on interest-rate-sensitive sectors should continue to negatively affect European earnings in Q4 and beyond. Market consensus points to moderate economic growth in Q1 2026, followed by similar recovery in sales and profits. A positive sign is that mid-term forecasts have become slightly more optimistic — profit growth for 2025 is now expected at -2.0% y/y versus -2.9% at the beginning of the season, and the 2026 forecast has been revised upward to +12.9% y/y from +12.6%.
Most importantly, forecasts for 2026–27 are turning more optimistic for key regional industries such as automotive, energy and basic materials, whose deterioration over the past three years has reduced their combined share of Stoxx-600 profits to just 12.6% (compared to 32% in 2022). As shown in chart 5, 2025 is expected to be the weakest year for these sectors, with substantial EPS improvement projected for 2026 and 2027.
Chart 5: Historical and forecast EPS (EUR per share) for selected sectors in Europe
Sources: Bloomberg, Allianz Research
The evolution of the euro should not be forgotten. It will likely continue to burden Europe’s export-oriented equity markets, although signs suggest that this negative trend may soon end (chart 6). If the euro does not continue to strengthen, European companies may be able to compete with U.S. firms on equal footing in 2026 — at least from a currency-exchange perspective.
Chart 6: Relative earnings revisions in Europe and the U.S. vs. the EUR/USD exchange rate
Sources: LSEG Datastream, Allianz Research
