Q1 2025 Earnings Season: Trends To Watch - Griffin Asset Management

An Underlying Uncertainty

The Q1 2025 earnings season is expected to be mired in “uncertainty.” Federal Reserve Chair Jerome Powell used the word five times in his opening address to the press following the Fed’s March meeting.

This sentiment is already impacting forecasts, with several companies reducing their Q1 earnings expectations. Estimated year-over-year Q1 earnings growth for the S&P 500 is now 7.1%, according to data from FactSet. That’s compared to an 11.6% growth rate estimated in December.

Investors are wary of slowing AI growth, sticky inflation, recessionary risks, and tariff policies. In fact, over half of S&P 500 companies touched on tariffs in their Q4 earnings calls. That’s the most tariffs have been mentioned in more than a decade, indicating broad concern of a potential trade war.

Goldman Sachs recently cut its 2025 GDP forecast from 2.2% to 1.7% to reflect the potential effect of tariffs. The bank highlighted tariffs’ impact on companies’ investment and hiring decisions, suggesting waning confidence in upcoming earnings.

Not-So-Magnificent Seven

The so-called “Magnificent 7” stocks — Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla — tend to have an outsized impact on S&P performance. But in the first quarter, each one lagged the broader index, for the first time since 2022.

This partially indicates a broader move to more defensive assets like healthcare and consumer staples. But investors should also note the specific factors contributing to each firm’s downtrend.

Tesla has suffered the most. Its stock plummeted 36% in the first quarter. The Economist reported that sales were already falling heading into the new year. And that’s before the mounting consumer backlash over CEO Elon Musk’s political involvement, which has led to surging used listings of Tesla vehicles and protests at dealerships, making major headwinds for the firm.

Elsewhere, disruption from the China-made low-cost AI model DeepSeek proved particularly damaging for Alphabet, Amazon, Meta, and NVIDIA. As a result, AI will also be top of mind for executives reporting Q1 earnings results. Investors might want to tune in too, to see if the substantial investments in the technology will pay off, or prove wasteful.

Increasing Natural Disasters

Another theme on many public companies’ radars is the rise of extreme weather events. In 2024, the number of mentions of natural disasters in earnings reports more than doubled between Q3 and Q4.

That’s no surprise, given the growing number of weather events dealing a billion dollars or more in damage. According to the National Centers for Environmental Information, there were more costly disasters (like severe storms, wildfires, and cyclones) in the last two years than ever before.

With investors gearing up for a cloudy Q1 earnings season, these trends will be worth watching closely, in search of some clarity amid the uncertainty.

Do you need help building a financial plan that can weather unpredictable times? Reach out to the advisors at Griffin Asset Management.