The upcoming earnings season is expected to once again underscore the widening performance gap between U.S. and eurozone corporates, according to strategists at JPMorgan Chase & Co.. Consensus forecasts point to a 6% year-on-year increase in S&P 500 earnings, compared with a 1% decline for the STOXX Europe 600.
Unlike the typical pre-earnings downgrades, analyst expectations have remained stable, with strategists noting that “activity momentum improved during the quarter,” supported by stronger PMI data. The team led by Mislav Matejka added that the “stability in estimates over the past two months raises the potential for positive surprises.”
Around 60% of the S&P 500’s market capitalization is set to publish results over the next two weeks, versus roughly 50% in Europe. Mega-cap tech remains the key driver: the Magnificent 7 are expected to deliver 15% earnings growth this quarter, following a 27% surge last quarter that was nearly double what analysts initially projected.
The remainder of the S&P 500 is seen growing earnings by about 4%. JPMorgan noted that non-Mag 7 companies achieved their strongest three-year earnings growth last quarter, at 9%, suggesting another upside surprise could be on the cards.
In Europe, earnings momentum has been more subdued. Eurozone firms posted a 1% earnings contraction in the previous quarter, supporting JPMorgan’s cautious stance on the region since March. However, strategists expect the performance gap to narrow “by a smaller magnitude” this quarter, as exporter earnings have already been heavily reset, allowing for the possibility of an “inflection.”
On a median basis, both the U.S. and eurozone are expected to see earnings growth of around 4% year-on-year, indicating some upside potential if revenue trends remain resilient.
Strategists also point to soft spots in the earnings picture, including weaker Brent crude prices and signs of a slowdown in U.S. labor and retail data, which could weigh on top-line growth. Falling bond yields—down over 60 basis points from their highs—have supported defensive sectors like Utilities and Healthcare across both regions in recent months.
While this reinforces the bank’s preference for long-duration positioning, the team also believes “cyclicals sector earnings could start to look better” as economic indicators turn more supportive. Rising PMI readings, improving credit dynamics in Europe and stronger consumer sentiment are key tailwinds they highlight.
Looking ahead to 2026, JPMorgan expects cyclical sectors to benefit from more favorable macroeconomic conditions, including a rebound in Chinese consumer demand that could lift luxury and industrial stocks. Although eurozone earnings forecasts for 2025 are still being revised lower, expectations for 2026 point to a near-15% rebound, supported by easier comparisons and improving demand both at home and abroad.
“We are now bullish Eurozone, post the sideways trading and amid a range of pushbacks,” the strategists wrote.
“If the latest tariff standoff and credit concerns result in some more equity weakness, we do not think Eurozone needs to be a beta on the way down, given more favourable positioning and valuations, and given an already weak recent relative performance,” they added.
The team also reiterated its view that recent political developments in France should be seen as a buying opportunity.
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