The Q2 2025 earnings season is wrapping up, with just a handful of companies left to report. The results provide a clear message: American corporations found ways to power ahead, despite a challenging backdrop of tariffs, policy uncertainty, and shifting global demand.
As I write, total Q2 2025 earnings are on track to rise by +12.1% from a year earlier on +6.1% higher revenues. Long time readers of my column know how much weight I place on strong earnings results. But the real market-moving feature of this earnings season was not just the strong results. It was about how much they exceeded expectations.1
Take a look at the chart below. You can see that 80.3% of S&P 500 companies exceeded earnings per share (EPS) estimates, which is nicely above the five-year average of 77.9%. The percentage of companies that beat revenue estimates also stands out as well above the five-year average and previous years’ results.2
The one sentence takeaway: businesses are still spending, consumers are still buying, and markets have responded accordingly.
This is not a cause for being ‘pound the table bullish,’ however. As I’ve written in recent columns, the feedback loop on tariffs and other policy changes is not immediate. Companies front-ran many tariffs and have worked through inventory, without having to pass on too many costs to consumers or see a big impact on margins. But this can’t continue indefinitely.
If tariffs persist at current levels, or rise further, more companies will likely need to raise prices, which could eventually weigh on demand. Business investment data also point to the same caution. While equipment spending looked solid in Q2, investment in structures fell -10.3%, and R&D registered its third consecutive decline. Both trends hint at executives becoming more selective about long-term projects until they see a clearer policy direction.
Leadership in the market also remains narrow. Technology firms continue to drive much of the growth story. In Q2, Tech sector earnings grew at a double-digit pace, propelled by demand for data centers, chips, and software tied to AI. The “Magnificent 7” stocks in particular have been standout performers, with earnings up +26.4% year-over-year on +15.5% higher revenues. While this leadership has lifted indexes, it has also concentrated risk. Excluding the Tech sector, Q3 earnings for the rest of the S&P 500 are expected to rise just +2.1%, compared with +5% overall. That discrepancy highlights how much weight a small group of companies continues to carry.
There are reasons to be cautious, but on balance, the economy continues to look ‘steady state’ to me. For Q3, S&P 500 earnings are projected to grow +5% from last year on +6% revenue growth. Notably, estimates have ticked higher since the start of July, which is a reversal from recent years when estimates tended to drift lower as the quarter progressed. The growth engine continues to run hottest in a few specific places like Tech, so we’ll need to see if that strength continues to broaden. It’s a reminder that investors should be mindful of concentration and avoid extrapolating recent gains as if they were uniform across the market. It’s important to be selective.
Bottom Line for Investors
Second-quarter earnings confirmed what markets have been signaling for months: resilience is still the operative word for the U.S. economy and corporate profits. Upward revisions to Q3 estimates and continued consumer spending are encouraging signs that growth hasn’t run out of steam. But it would be a mistake to assume the rally will be a straight line higher from here. The earnings picture remains top-heavy, and companies may not be able to shield consumers from higher tariff costs indefinitely.
Overall, I think the backdrop remains bullish, supported by healthy profits, fiscal tailwinds, and a still-strong labor market. Staying invested is the right approach, but balancing exposure beyond the biggest winners can help ensure portfolios remain positioned for whatever the next phase of this expansion delivers.
1 Wall Street Journal. April 28, 2025. https://advisor.zacksim.com/e/376582/onomy-trendingnow-article-pos5/5tj7by/1310520493/h/gMfhEJJWnxSoKzUFqNyuFAcg2GLIuStlz5bnUo-tzGk
2 Zacks.com August 27, 2025. https://advisor.zacksim.com/e/376582/q2-retail-earnings-good-or-bad/5tj7c2/1310520493/h/gMfhEJJWnxSoKzUFqNyuFAcg2GLIuStlz5bnUo-tzGk
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