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 110 S&P 500 members that have reported results are up +6.1% from the same period last year on +5.0% higher revenues, with 74.5% beating EPS estimates and 62.7% beating revenue estimates.

• We continue to believe that this earnings season is less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the emerging tariff and macroeconomic backdrop. Guidance is always the most important aspect of any earnings season, but it will be an even more significant part of the Q1 reporting cycle.

• For 2025 Q2, total S&P 500 earnings are expected to be up +7.8% from the same period last year on +3.9% higher revenues. Estimates for the period have been coming down lately, which aligns with the negative trend we experienced before the start of the Q1 earnings season.

• Estimates for full-year 2025 have started coming down meaningfully in recent weeks, particularly since about mid-February, with estimates for 14 of the 16 Zacks sectors getting cut. Sectors suffering the most significant cuts include Energy, Tech, Finance, and Medical. Estimates have moved up for the Construction and Aerospace sectors.

Tech Sector Outlook Weakens

Uncertainty about the overall macroeconomic picture continues to be a significant drag on the earnings outlook as a whole, prompting analysts to cut their estimates for the current and coming periods.

This uncertain environment makes it difficult for companies to provide explicit guidance for the coming periods. We had noted here how United Air Lines (UAL Quick QuoteUAL - Free Report) had provided a two-pronged outlook, with one guidance a reiteration of their existing outlook and the second describing the earnings impact of a recessionary backdrop.

Since then, 3M (MMM Quick QuoteMMM - Free Report) followed United Air Lines’ lead by reiterating its outlook for the year, but also gave a tariffs component that will potentially weigh on full-year EPS in the -2.5% to -5% range.

We are starting to see this in the revisions trend, both for the current period (2025 Q2) and full-year 2025. The chart below shows how 2025 Q2 estimates have started coming down lately.

Image Source: Zacks Investment Research

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

The emerging negative revisions trend appears to be broad-based, with Aerospace and Construction as the only sectors experiencing modest positive revisions.

Of the sectors suffering negative estimate revisions, the case of the Tech sector is particularly significant as this sector had thus far been enjoying a very favorable revisions trend for more than a year now.

For 2025 Q2, the Tech sector is currently expected to bring in +11.5% more earnings relative to the same period last year. This growth expectation is down from +14.2% on April 2^nd. For full-year 2025, the expectation is for sector earnings to increase +10.2% from the 2024 level, a decline from the +12.1% growth expected on April 2^nd.

The chart below shows how full-year 2025 aggregate earnings expectations for the sector have evolved over time.

Image Source: Zacks Investment Research

The chart below shows the overall earnings picture on an annual basis.

Image Source: Zacks Investment Research

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. It is reasonable to expect these estimates to be adjusted downward as the effects of slowing U.S. economic growth and tariffs begin to be reflected in diminished corporate profitability.