Nearly 100 companies, including 38 S&P 500 members, are set to report Q2 earnings this week, marking a pivotal moment in the earnings season. Key reports include those from big banks and other sector leaders such as Netflix, 3M, and Schlumberger.
The trend of negative estimate revisions for 2025 Q2 has been observed, with earnings expected to grow by 4.7% on 4% higher revenues. This would be the slowest growth since Q3 2023’s rate of 4.3%, with estimates taking a hit following tariff announcements in early April.
Sector Declines and Market Expectations
14 out of 16 Zacks sectors have seen a decline in Q2 estimates since April, with notable cuts in Autos, Energy, and Transportation. Despite tariff uncertainties, the market expects better-than-expected results due to lowered expectations, with management likely providing a positive outlook.
S&P 500 index ‘EPS’ is projected to be $254.07 for 2025 and $287.36 for 2026. Excluding the Energy sector, which is estimated to see a 13.3% decline, total 2025 earnings are expected to rise by 8.3%.
As of July 11th, results from 21 S&P 500 members show a 1.3% earnings increase with 5.8% revenue gains, with most companies surpassing EPS and revenue estimates. Netflix’s shares have surged by 39.7% this year, while Schlumberger’s stock faces challenges amidst fluctuating oil prices.
With nearly a fifth of the S&P 500 names reporting this week—including heavyweight players across banking, industrials, tech, and services—markets are bracing for data that could either reinforce recent optimism or add friction to the upward drift in valuations. The presence of Netflix and several prominent financials heightens the impact, especially given how these names often lead broader index movements. Traders should note that despite their volatility, these earnings won’t be easily ignored.
Deceleration in Earnings Momentum
There’s a definite deceleration in earnings momentum when looking ahead. Growth expectations for the second quarter of next year, sitting at just under 5%, represent the weakest showing since third quarter 2023. This softness isn’t just a numbers game—it’s being priced in, following tariff-policy shifts announced in early April that have suppressed both top-line and bottom-line projections.
We’ve observed that the market typically adjusts quickly to weaker guidance, and that seems to be at play again. That 14 of 16 sectors under Zacks classification have experienced estimate reductions only reinforces the breadth of this adjustment. Notably, Autos, Energy, and Transport have borne the brunt of it. Energy alone is forecast for a 13.3% drop in earnings. When stripping Energy out of the broader data, earnings growth would come in at over 8%—which, in relative terms, is almost double the reported figure.
Most of the companies that have posted so far are beating expectations. That’s not necessarily due to extraordinary performance, but rather a cushion created by downward revisions over the past months. This pattern typically encourages upbeat guidance from management teams looking to regain lost investor confidence.
S&P 500 earnings per share (EPS) are lined up to reach just over $254 next year and nearly $287 the year after. Given those figures, equity valuations may start to look stretched if results do not continue eclipsing consensus. It is not about having a perfect quarter—only about outpacing lowered assumptions.
From a volatility perspective, this phase of earnings season creates sharp but temporary shifts in options pricing and directionality. We’ve historically seen that disappointment in one or two heavyweights can skew entire sectors. On the flip side, better-than-expected margins or unexpected revenue beats can trigger strong, short-lived directional trends. This dislocation presents both risk and opportunity.
And then there’s the diverging performance of names like Netflix and Schlumberger. The former has enjoyed remarkable price appreciation year-to-date, aided by macro tailwinds and internal execution. Meanwhile, Schlumberger’s drag reflects a more complex macro reality tied to energy demand and commodity movements. These gaps between winners and laggards will continue generating dispersion, a driver that can offer tradeable setups under the right conditions.
What matters most now is tracking how full-year and 2025 guidance evolve over the next few sessions. With revised estimates already lower, we believe the skew in expectations is to the upside. This could trickle into implied volatility metrics as pricing normalises toward upcoming macro catalysts and central bank commentary expected before summer ends.
The next several trading sessions will offer a narrower focus, not only on surprise metrics, but on volume and price confirmation. Keep watch on how the market digests softer sectors like Autos and Retreating Industrials. Renewed strength in Financials and Communication Services could surface as valuation gaps pull in capital.
The lien between sentiment and numbers is tightening. We should watch positioning and total open interest shifts in the near-term contracts, particularly calls and straddles aligned with major releases. Adjusting for sector beta and implied volatility skew remains essential this week.
