Corporate Earnings Preview Q2 2025: Margin Pressures and Guidance Concerns

As second-quarter 2025 earnings season approaches, analysts focus on margin pressures and forward guidance amid economic uncertainty. Consensus expectations point to S&P 500 earnings growth of 4.2% year-on-year, a deceleration from Q1's 6.8% but still positive. Revenue growth is forecast at 3.5%, suggesting margin compression of approximately 70 basis points. Sector divergence appears significant with technology earnings expected to grow 11% driven by AI-related spending, while consumer discretionary faces a 2% decline on weakening demand. Financials project 7% growth supported by net interest income despite rising credit provisions. Energy sector earnings may fall 5% on lower commodity prices. Key themes include: First, wage inflation impact with labor costs rising faster than revenue for service companies. Second, pricing power erosion as consumers resist further price increases, particularly in discretionary categories. Third, supply chain normalization reducing the extraordinary margins enjoyed during shortage periods. Fourth, currency headwinds for multinationals with dollar strength impacting approximately 3% of S&P 500 earnings. Guidance will be crucial with focus on second-half visibility and 2026 preliminary outlooks. CFO surveys suggest conservative bias with 65% planning to lower or maintain guidance. Buyback activity remains robust at $230 billion quarterly run-rate, supporting EPS despite operational headwinds. Beat rates may decline from historical 75% to closer to 65% as estimate revision patterns normalized. The report concludes that while earnings remain positive, the era of easy beats has ended, requiring more selective stock picking based on company-specific fundamentals.