EARNINGS SEASON
The Earnings season is a key period for investors, as it reveals company performance. Positive or negative earnings reports might dramatically affect stock prices, and market participants may try to position themselves ahead of these results. A better-than-expected earnings result could lead to stock price increases, as it reflects market growth. Negative results—such as revenue misses, profit declines, or lower guidance—can lead to sharp sell-offs, as investors react to company underperformance or negative outlook.
- EARNINGS: WHAT’S IMPORTANT AND WHY
There are three metrics that market participants watch closely. Arguably, the most important is the Earnings Per Share (EPS). The second is the revenue figure – the question for both is: did they beat expectations. Expectations are published in advance of the results and if the company has a ‘beat’ preferably in both categories, this is considered a good company performance. However, guidance is crucial. While earnings figures refer to the past performance of the previous quarter, guidance refers to projections for the coming period. If the CEO states that their industry is facing a very challenging period, this is not a good sign for the company’s future, regardless whether the company posted a beat. If a company’s earnings results are mixed, but future guidance is strongly positive, its stock price may still rise.
- HOW DOES THE EARNINGS SEASON AFFECT THE MARKETS?
During the Earnings season stock prices are likely to be volatile as markets attempt to anticipate and to react to newly released information. An earnings ‘beat’ or a ‘positive surprise’ might lead to price increases while an earnings miss may lead to a sell off. It’s also important to understand that individual company results can impact other company prices that have not revealed earnings yet. For example, if a semiconductor or chip company posts excellent earnings, other chip companies prices may also rise, anticipating similar results, perhaps due to increased sales in the industry as a whole.
- PREVIOUS EARNINGS SEASON
In Q2 of 2025, the earnings season saw positive results. Information Technology companies—especially those linked to AI—were among top performers in terms of sectors. In fact, 92% of tech companies posted earnings beats. 80% of companies reported earnings above earnings estimates, well above the longer term average of 67%. Companies like Nvidia, Microsoft and Meta beat expectations due to demand for AI solutions, and their stock prices rose in the days and weeks following their posted results. Energy was among the worst performing sectors, partly due to lower oil prices and some saw stock declines.
- WHAT TO EXPECT THIS SEASON AS STOCKS SCALE RECORD HIGHS?
Technology and communication sector stocks (e.g. Microsoft, Meta, etc) are again expected to be among the top growing sectors. The continued growth of AI combined with falling interest rates and the multi billion dollar deals signed by NVIDIA, INTEL, AMD and many other tech companies in recent weeks give hopes for further growth. On the other hand, the energy sector (e.g. Chevron, Exxon etc) is again expected to record lower revenue due to lower oil prices. S&P 500 earnings growth is expected to be around 8% year on year. Participants will seek signs on the potential impact of tariffs which may now have filtered through. Stock prices have hit repeated record highs, driven by trade optimism and the successful passage of corporate tax cuts through Congress.
- WHEN DO THE ‘BIG BEASTS’ DECLARE EARNINGS?
The big banks kick off the earnings season and act as a bellwether on the rest company earnings from October 13th. The biggest companies kick off the following week led by Tesla on October 22nd and Amazon a day later. The following week will see Microsoft, Meta, Apple and many others post their results. NVIDIA tends to report earnings later in the season, around mid November.
Conclusion
Stocks have continued on their record breaking run in 2025, surging to record highs, despite recent trade concerns and market volatility. With trade deals between major partners like the US and EU signed, markets are looking ahead. The bull market continues and markets have priced in another two Fed rate cuts. But the earnings season remains vital, since it’s the period when details are revealed about company performance and results may influence price movements.