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Earnings season is in full swing

About two-thirds of America’s S&P 500 have reported their second quarter earnings, and the results can be summed up as: surprisingly okay.

The first half of 2025 has been characterised by plenty of macroeconomic noise. Trade wars and on-again, off-again tariffs have created a challenging operating environment for American companies. As a result, expectations were low heading into earnings season.

So it is perhaps unsurprising to see that at the end of last week (1 August), of the 66% of America’s S&P 500 companies that had reported, 82% reported earnings per share (EPS) above estimates.¹ This is better than the 10-year average of 75% of S&P 500 companies beating EPS estimates. The average EPS beat so far this earnings season has been 8% above estimates.

It’s not just earnings. 79% of the S&P 500 companies that have reported have beaten revenue estimates, which is far above the 10-year average of 64%.² 

This is great news. The world’s largest companies are weathering the storm of the trade war better than expected. But expectations were low. How are they actually going?

FactSet’s blended earnings growth rate (that combines actual results for companies that have reported and estimated results for companies yet to report) is 10.3% for the S&P 500.³  

If 10.3% is the actual earnings growth rate for the quarter, it will mark the third consecutive quarter of double-digit earnings growth for the index.

So it isn’t just that expectations were low. Companies aren’t just stepping over a low bar. Double-digit earnings growth is a sign of the strength of America’s largest companies. It is a useful reminder for clients (and for ourselves) of why we stay invested despite the macro noise.

And hopefully it is a sign of things to come as we gear up for Australia’s reporting season.

With earnings season in full swing, we wanted to share 3 big takeaways from the companies that have reported so far.

1. The cost of tariffs is starting to come through

If the theme emerging from Q1 earning was tariff uncertainty, then the theme emerging from Q2 is tariff impacts. Across the US economy, the costs are being reported. Take consumer packaged goods giant Procter & Gamble that forecasts $1 billion in tariff costs for the 2026 financial year (and have said they would raise prices to cover it).

Yet the impact of tariffs is clearest in the auto industry. Facing the double-whammy of cross-border tariffs and tariffs on steel, the costs are being felt by traditional automakers already struggling to keep up with EV transition.

• Ford expects $2 billion in tariff costs in 2025

• Stellantis (maker of Chrysler and Jeep) forecasts $1.7 billion

• Volkswagen paid $1.5 billion in the first 6 months of 2025

• General Motors projects tariff costs could be as high as $5 billion in 2025

Tariffs being paid by companies is leading to a record income at the US treasury. In June 2025, $26.6 billion was collected in tariffs, almost 4x the amount collected in January. So far in 2025, more than $150 billion has been collected.

The takeaway: this is likely just the start. As ‘Liberation Day’ tariffs are reapplied, investors should be considering their portfolio’s tariff-exposure. Exposure to cross-border supply chains and ability to pass price rises on to consumers should be key considerations when thinking about portfolio risk.

2. AI investments are paying dividends

Big Tech keeps getting bigger. Just a quick summary of the numbers shows that these trillion dollar companies keep growing off their large bases:

• Apple: Revenue up 10%, profit up 9%.

• Microsoft: Revenue up 18%, profit up 24%.

• Alphabet: Revenue up 14%, profit up 19%.

• Amazon: Revenue up 13%, profit up 35%.

• Meta: Revenue up 22%, profit up 36%.

Dig beyond the headline numbers and you can start to see the impact of AI investments from Big Tech starting to come through.

• Microsoft’s AI business revenue grew 175% year-on-year.

• Google’s AI overviews reported 2 billion monthly users.

• Meta pointed to AI targeting as a driver of increased ad pricing.

The takeaway: Comparisons between today’s tech boom and the late 1990’s tech boom are overdone. Sure, the top of the index may be reaching similar levels of consolidation and P/E ratios may be stretched, but there is real revenue and profit being generated here. You would be a brave fund manager or adviser to go underweight Big Tech.

3. Tech growth isn’t confined to Big Tech

While the ‘Magnificent 7’ capture the headlines, the business story of some of the 'second-tier’ technology companies has been equally impressive.

Coming out of the COVID-boom years of 2020 and 2021, many of these companies saw share prices fall 50% plus as interest rates rose and investors punished unprofitable companies. Think: Spotify down 81% or Shopify down 85%.

The following couple of years the best of these companies focused on becoming profitable. A company like Uber is a case study for financial discipline in those post-COVID years: after falling 65% from 2021 it turned a profit in 2023, share price turned and is now 44% above its 2021 high.

Some of these smaller tech companies have reported incredible revenue growth in this earnings season:

• Reddit: revenue up 78% year-on-year

• Roblox up 21%

• Nintendo up 132% (driven by the successful launch of the Switch 2)

• Roblox up 21%

The takeaway: The past 5 years will be a textbook example of how great companies go through bad periods, often due to market sentiment or factors outside of their control. This was become the case study for finding great companies and waiting for the market to offer them at a discount.

And if you read that and lament that you didn’t take full advantage of the incredible discounts Mr. Market offered, don’t despair. There will always be another sale. So do the work, build your conviction, and make sure you’re ready for the next opportunity.

Eley Griffith’s investor toolkit, how Loftus Peak has delivered >20% p.a. returns for 10 years and why we are still early on India. These are just some of the topics we’ve covered over the past month on Basis Points.

You can check out all episodes on YouTube, Apple Podcasts, Spotify or wherever you listen to podcasts.

As part of our mission to support all Australian advisers, every Basis Points episode is accredited for CPD by the Financial Advice Association of Australia. To claim your CPD Points:

• Listen to or watch the episode

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Check out some of our latest episodes:

Alex Pollak, CIO of Loftus Peak, unpacks how the firm invests at the cutting-edge of disruption.

Ben Griffiths, Executive Chairman of Eley Griffiths, takes us into the playbook he has built over 20 years of successfully investing in Australian small caps