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A Closer Look at Earnings Expectations for Q1 & Full-Year 2025
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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 2025 Q1 earnings for the S&P 500 index are expected to be up +6.1% from the same period last year on +3.7% higher revenues, which would follow the +13.8% earnings growth on +5.4% revenue growth in the preceding period.
Q1 earnings estimates have steadily come down since the quarter got underway, with the current +6.1% expected growth pace down from +10.4% at the start of January 2025.
Not only is the magnitude of negative revisions to Q1 estimates greater than what we had seen in the comparable periods of other recent periods, but it is also more broad-based, with 13 of the 16 Zacks sectors suffering estimate cuts in this time period.
Q1 earnings for the ‘Magnificent 7’ group of companies are expected to be up +13.9% from the same period last year on +11.9% higher revenues. Excluding the ‘Mag 7’ contribution, Q1 earnings for the rest of the index would be up +3.9% (vs. +6.1%).
Soft Start to the Q1 Reporting Cycle
The March-quarter earnings season will really get underway once the big banks start reporting results on Friday, April 11th. But we have seen quarterly results from a few companies in recent days for their respective fiscal quarters ending in February. In fact, 5 S&P 500 members with such February-ending fiscal quarters have reported results in recent days, including bellwethers like Costco (COST - Free Report) , Oracle (ORCL - Free Report) , and Adobe (ADBE - Free Report) . We count all such February-quarter results as part of our March-quarter earnings tally.
It is too early to draw any conclusions from these early results, but market participants have not been impressed with these results, particularly on the guidance front. The guidance issues for these bellwethers are potentially problematic given the all-around macro worries that the market is currently sizing up.
Oracle missed on the top- and bottom-lines, but the internals of the company’s release showed plenty of growth momentum, with impressive gains on the backlog front. What was less impressive was the outlook for margins and a further ramp-up in capex spending. Adobe, on the other hand, beat earnings and revenue estimates, but the reiterated guidance can be seen as a decelerating growth trend, and the AI ramp-up is seen as too slow. While earnings estimates for Adobe for the current period (fiscal quarter ending in May) have remained stable after the quarterly release, the same for Oracle have come down.
The chart below shows the year-to-date performance of Oracle and Adobe shares relative to the S&P 500 index.
Image Source: Zacks Investment Research
Tech Sector Remains a Growth Driver
The Tech sector has been a significant growth driver in recent quarters, and we saw the same trend at play in 2024 Q4. For Q1, Tech sector earnings are expected to be up +12.7% from the same period last year on +10.0% higher revenues, the 7th quarter in a row of double-digit earnings growth.
This would follow the sector’s +26.2% earnings growth on +11.3% higher revenues in 2024 Q4. As the chart below shows, the sector’s growth trajectory is expected to continue in the coming quarters.
Image Source: Zacks Investment Research
The Tech sector has also been among those few sectors that have steadily enjoyed an improving earnings outlook, with estimates steadily increasing over the past year. However, the more recent data on this count shows a shift in the revisions trend, with estimates for Q1 modestly under pressure since January, though they remain positive for the full year 2025. You can see this in the chart below of aggregate 2025 earnings estimates for the sector.
Image Source: Zacks Investment Research
The Earnings Big Picture
The chart below shows expectations for 2025 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters.
Image Source: Zacks Investment Research
As you can see in the above chart, total S&P 500 earnings for the current period (2025 Q1) are currently expected to be up +6.1% from the same period last year on +3.7% higher revenues.
Estimates for the period have been coming down since the quarter got underway, as the chart below shows.
Image Source: Zacks Investment Research
The revisions trend is broad-based, with estimates for 15 of the 16 sectors down since the start of January (Medical is the only sector whose estimates have increased). Sectors suffering the most significant cuts to estimates include Conglomerates, Aerospace, Construction, Basic Materials, Autos, and others. Unlike other recent periods, estimates for the Tech sector have also been under pressure.
The chart below shows the overall earnings picture on an annual basis.
Image Source: Zacks Investment Research
As you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
In fact, 2025 is expected to have nearly all Zacks sectors enjoy earnings growth, with 6 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have strong earnings growth in 2025, even without contributions from this mega-cap group.
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A Closer Look at Earnings Expectations for Q1 & Full-Year 2025
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:
Soft Start to the Q1 Reporting Cycle
The March-quarter earnings season will really get underway once the big banks start reporting results on Friday, April 11th. But we have seen quarterly results from a few companies in recent days for their respective fiscal quarters ending in February. In fact, 5 S&P 500 members with such February-ending fiscal quarters have reported results in recent days, including bellwethers like Costco (COST - Free Report) , Oracle (ORCL - Free Report) , and Adobe (ADBE - Free Report) . We count all such February-quarter results as part of our March-quarter earnings tally.
It is too early to draw any conclusions from these early results, but market participants have not been impressed with these results, particularly on the guidance front. The guidance issues for these bellwethers are potentially problematic given the all-around macro worries that the market is currently sizing up.
Oracle missed on the top- and bottom-lines, but the internals of the company’s release showed plenty of growth momentum, with impressive gains on the backlog front. What was less impressive was the outlook for margins and a further ramp-up in capex spending. Adobe, on the other hand, beat earnings and revenue estimates, but the reiterated guidance can be seen as a decelerating growth trend, and the AI ramp-up is seen as too slow. While earnings estimates for Adobe for the current period (fiscal quarter ending in May) have remained stable after the quarterly release, the same for Oracle have come down.
The chart below shows the year-to-date performance of Oracle and Adobe shares relative to the S&P 500 index.
Image Source: Zacks Investment Research
Tech Sector Remains a Growth Driver
The Tech sector has been a significant growth driver in recent quarters, and we saw the same trend at play in 2024 Q4. For Q1, Tech sector earnings are expected to be up +12.7% from the same period last year on +10.0% higher revenues, the 7th quarter in a row of double-digit earnings growth.
This would follow the sector’s +26.2% earnings growth on +11.3% higher revenues in 2024 Q4. As the chart below shows, the sector’s growth trajectory is expected to continue in the coming quarters.
Image Source: Zacks Investment Research
The Tech sector has also been among those few sectors that have steadily enjoyed an improving earnings outlook, with estimates steadily increasing over the past year. However, the more recent data on this count shows a shift in the revisions trend, with estimates for Q1 modestly under pressure since January, though they remain positive for the full year 2025. You can see this in the chart below of aggregate 2025 earnings estimates for the sector.
Image Source: Zacks Investment Research
The Earnings Big Picture
The chart below shows expectations for 2025 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters.
Image Source: Zacks Investment Research
As you can see in the above chart, total S&P 500 earnings for the current period (2025 Q1) are currently expected to be up +6.1% from the same period last year on +3.7% higher revenues.
Estimates for the period have been coming down since the quarter got underway, as the chart below shows.
Image Source: Zacks Investment Research
The revisions trend is broad-based, with estimates for 15 of the 16 sectors down since the start of January (Medical is the only sector whose estimates have increased). Sectors suffering the most significant cuts to estimates include Conglomerates, Aerospace, Construction, Basic Materials, Autos, and others. Unlike other recent periods, estimates for the Tech sector have also been under pressure.
The chart below shows the overall earnings picture on an annual basis.
Image Source: Zacks Investment Research
As you can see, the expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
In fact, 2025 is expected to have nearly all Zacks sectors enjoy earnings growth, with 6 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have strong earnings growth in 2025, even without contributions from this mega-cap group.