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US earnings season

Why should investors focus on earnings over political news?

Discover how the US 500's (S&P 500) earnings growth offers valuable insights into the health of the US economy and why smart money prioritises financial fundamentals over political theatrics.

US earnings Source: Adobe images
US earnings Source: Adobe images

Written by

Chris Beauchamp

Chris Beauchamp

Chief Market Analyst

Article publication date:

Key takeaways

  • US 500 earnings show 5% growth, marking 19 consecutive quarters of revenue gains
  • Tech and communication services lead gains, while energy's slump is cyclical

Corporate America delivers steady growth despite headwinds

The numbers are in, and they tell a reassuring story. US 500 earnings growth is expected to hit 5.0% for the second quarter (Q2) 2025, proving that corporate America continues to deliver solid results even as economic conditions evolve.

Forecast revisions show typical seasonal adjustment

While this represents a step down from March's initial 9.4% projection, seasoned investors recognise this seasonal adjustment for what it is: the natural process of expectations aligning with reality. Analysts always start optimistic and gradually fine-tune their forecasts. What matters is that growth remains positive and meaningful.

A 5% earnings expansion in today's environment represents genuine achievement, demonstrating corporate management's ability to navigate challenges while maintaining profitability.

US 500 ​Earnings growth chart ​Source: Factset/ IG
US 500 ​Earnings growth chart ​Source: Factset/ IG

Why earnings trump political headlines

  • Earnings, not politics, ultimately determine share-price direction and long-term wealth creation. Political noise may trigger short-lived swings, but it rarely changes a company's fundamental ability to make money
  • History proves the point: during the 2018-19 tariff dispute, dramatic headlines dominated the news cycle, yet the US 500 still posted solid returns because American businesses kept generating profits. Earnings are the market's true north star; everything else is background chatter

Why this matters for investors

  • Focusing on earnings helps investors cut through the daily drama, stay disciplined and spot real opportunities. When profits rise across multiple sectors, it signals broader economic health and supports higher equity valuations. By contrast, trading every political twist risks whipsaw losses and missed upside
  • In practical terms, building a portfolio around companies with consistent earnings strength, instead of reacting to every headline,  has historically delivered better risk-adjusted returns. Staying earnings-centric also encourages longer holding periods, reducing transaction costs and emotional decision-making

Quick fact

Ignore the political theatre and stay laser-focused on earnings: they are the most reliable
signal of long-term share-price performance and portfolio growth

Sector performance highlights tech leadership

Communication Services is powering ahead with spectacular 29.5% year-on-year (YoY) earnings growth, while Information Technology maintains robust momentum at 16.6%. Energy faces a 25.6% decline, but this is a normal commodity-price cycle rather than structural weakness.

Six of 11 sectors still show positive YoY earnings growth, underscoring American enterprise's depth and offering fertile ground for selective strategies.

US sector performance Source: IG
US sector performance Source: IG

Nineteen-quarter revenue run underpins resilience

Revenue growth is expected at 4.2% for Q2 2025, marking the 19th consecutive quarter of top-line expansion. Information Technology again leads with 12.3% revenue growth, reflecting digital transformation and artificial-intelligence adoption. Even Energy's 9.9% revenue dip is price-driven, not demand-driven.

Valuations remain supported by strong margins

The US 500's forward 12-month price-to-earnings ratio of 22.2 and forecast net margin of 12.3% show that investors are willing to pay a premium for quality earnings streams.

Guidance suggests Q2 pause is temporary

Although 54% of US 500 companies issued negative Q2 guidance, that is below long-run averages. Consensus still calls for 9.1% full-year 2025 earnings growth, with Health Care and Energy leading the pack.

Ready for the next results season?

Stay one step ahead

Important to know

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