The Q1 2025 earnings season has so far exceeded expectations according to FactSet data with 98% of S&P 500 firms having reported and 78% beating consensus EPS forecasts by an average of 8.5%, lifting blended EPS growth to 13.3% - nearly double the pace expected at the quarter’s outset and marking a second straight quarter of double‑digit gains.
Contributions to this upside came from Communication Services, Health Care and Financials, while Information Technology continued to benefit from robust cloud and artificial intelligence (AI) spending.
As earnings season draws to a close, retail giants were among the last to report, though some delayed releases amid tariff uncertainty that has led many firms to withdraw or scale back guidance.
Broad‑Based Earnings Strength
By mid‑May, approximately 98% of S&P 500 constituents had reported Q1 results, with 78% delivering EPS above analysts’ estimates, surpassing the 10‑year average of 75% and edging past the 5‑year norm of 77%.
On aggregate, these companies have beaten forecasts by 8.5%, outpacing the 10‑year average beat of 6.9% and narrowly trailing the 5‑year average of 8.8%. This has driven the blended EPS growth rate - a composite of actual and estimated results - to 13.3%, up from 12.9% just a week earlier and far above the 7.2% pace projected at the end of March.
Revenue performance has also been healthy: 64% of reporting companies topped revenue forecasts, though this lagged the 5‑year average of 69% and the 10‑year average of 64%. In aggregate, revenues were 0.8% above estimates, marking the 18th consecutive quarter of revenue expansion for the index.
The split between positive and negative revenue surprises across sectors was balanced out in the last week, leaving the blended revenue growth rate at 4.9% - up from 4.3% at quarter‑end.
Sector Contributions
Communication Services, Health Care & Financials
Positive EPS surprises in Communication Services, Financials and Health Care have been the principal drivers of the upward revision to the S&P 500’s aggregate earnings growth since 31 March.
Eight of 11 sectors are now reporting year‑over‑year earnings increases, led by Health Care, Communication Services, Information Technology and Utilities. Conversely, Energy remains the lone sector in decline, hampered by the steep slide in oil prices.
Technology Resilience
The Information Technology sector has delivered yet again, propelled by sustained investment in cloud computing and artificial intelligence. Microsoft’s cloud business grew over 20%, and its Copilot‑embedded Office suite saw rising customer uptake.
Alphabet’s Google Cloud revenue jumped 28% year‑over‑year to US$12.3 billion, prompting the company to earmark $75 billion in capital expenditure for compute capacity through 2025.
Zacks Research notes that Q2 earnings estimates for Tech have begun reversing earlier downgrades, rising over the last fortnight as investor optimism returns to the Mag 7 players.
Standout Beats
Netflix delivered a strong earnings beat, posting a 13% year-on-year revenue increase for the first quarter of 2025. The company credited the outperformance to stronger-than-anticipated contributions from both subscriptions and advertising.
The company reiterated its full-year revenue guidance of between $43.5 billion and $44.5 billion. “There’s been no material change to our overall business outlook,” Netflix stated in its quarterly release.
Palantir Technologies surpassed both the top and bottom lines and raised its full-year revenue guidance to $3.89 - 3.9 billion from $3.74 - 3.76 billion, buoyed by enterprise uptake of its AI offerings.
Disney exceeded EPS and revenue expectations, driven by better‑than‑forecast subscriber additions to Disney+ and resilient theme‑park attendance.
Notable Misses
Wynn Resorts reported disappointing first-quarter results, falling short of analyst expectations for revenue and earnings.
Net income declined sharply to US$72.7 million, representing a 50% drop from the prior year’s first quarter, while total revenue came in at US$1.70 billion, down 8.7% compared to the same period last year, and 2.0% below analyst forecasts.
The company’s profit margin also narrowed considerably, falling to 4.3% from 7.7% a year ago. This margin compression was largely driven by the decline in overall revenue.
Earnings per share (EPS) dropped to US$0.69, down from US$1.30 in Q1 2024, and missed consensus estimates by 45%.
Looking ahead, Wynn Resorts is projected to grow revenue at an average annual rate of 3.3% over the next three years, lag behind the broader United States hospitality industry’s forecasted growth rate of 9.8%.
Restaurant Brands International reported weaker-than-expected earnings and revenue for the first quarter of 2025, as same-store sales declined across its major chains - Burger King, Popeyes, and Tim Hortons.
The company posted adjusted EPS of 75 cents, falling short of the 78 cents forecast. Revenue came in at $2.11 billion, just under the $2.13 billion expected.
Net income attributable to shareholders dropped to $159 million, or $0.49 per share, compared to $230 million, or $0.72 per share, in the same quarter a year earlier.
Retailers Warn of Tariff-Driven Slowdown Ahead
Tariffs are beginning to take a visible toll on U.S. retailers, with many of the country’s largest chains warning that the second half of 2025 could be significantly more difficult than the first.
The latest round of quarterly earnings has seen several major retailers cut their full-year forecasts, citing the rising cost of imports and a looming squeeze on consumer spending. While the new tariffs began taking effect in early April, their full financial impact has only begun to show.
Retail giants including Macy’s, Target, Best Buy, and Abercrombie & Fitch, have all downgraded their earnings or revenue projections.
Others, like American Eagle Outfitters, Deckers Outdoors, and Ross Stores, chose not to offer full-year guidance at all, citing ongoing uncertainty.
Gap said it had maintained its annual forecast for now, but executives cautioned that the outlook did not yet reflect tariff-related costs. They warned the company could see a hit of up to US$150 million in operating income, mostly in the second half of the year.
Even retailers with relatively upbeat reports are exercising caution. Ulta Beauty, which slightly raised its full-year guidance, said the economic picture for the latter half of 2025 remained cloudy.
Cautionary Tales
Walmart reported better-than-expected earnings, but warned that higher tariffs could soon lead to price increases for consumers.
Chief Financial Officer John David Rainey said that even with the recent 90-day reduction of tariffs on Chinese imports to 30%, the cost remains “still too high”.
"We can control what we can control," Walmart CEO Doug McMillon said on the company's first-quarter earnings call. "Even at the reduced levels, the higher tariffs will result in higher prices."
President Trump said in a social media post: "Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected."
"Between Walmart and China they should, as is said, 'EAT THE TARIFFS,' and not charge valued customers ANYTHING."
Forward Guidance and Market Outlook
Despite the strong Q1 results, management commentary trends cautiously. A below‑average percentage of companies have provided forward guidance, and high‑profile names like General Motors, American Airlines and Walgreens have withdrawn or postponed outlooks, citing uncertainty around tariffs and economic growth.
Consensus estimates call for earnings growth of 5.2% in Q2, 7.4% in Q3 and 6.7% in Q4 2025, with full‑year EPS growth of 9.3% - figures that assume stability in profit margins and a gradual easing of cost pressures.
The forward 12‑month P/E ratio stands at 20.5, above its 5‑year average of 19.9 and above the 10‑year norm of 18.3, signalling that investors are willing to pay a premium for earnings visibility even as macro risks persist.
Conclusion
The Q1 2025 earnings season delivered a robust finish, anchored by broad‑based earnings beats and resilient top‑line growth.
Technology firms have reaffirmed the AI-driven expansion narrative, while Communication Services and Health Care have underpinned headline EPS gains.
Yet, consumer-facing names and retailers will undergo final scrutiny this week, as tariff‑related cost pressures and cautious spending patterns test household budgets' stamina.
Looking forward, analysts’ forecasts and premium valuation multiples imply confidence in continued growth, albeit against a backdrop of macroeconomic and geopolitical headwinds.
Investors will closely watch guidance trends and margin trajectories as Q2 results approach, seeking clarity on whether the cycle of outperformance can persist.