S&P 500 Earnings Update: Q2 '25 Earnings Should Be OK; The Attention Turns To Q3 '25 Guidance

Q2 2025 S&P 500 earnings are projected to be solid, potentially mirroring the strength of Q1 results, while Q3 2025 earnings guidance is expected to be cautious due to expiring reciprocal tariffs on July 8th. Despite downward revisions to Q2 and Q3 2025 EPS growth expectations, Q3 EPS is currently holding up slightly better, according to Brian Gilmartin, portfolio manager at Trinity Asset Management.

Analysis

The near-term outlook for S&P 500 earnings is mixed, characterized by potentially strong Q2 2025 results but significant caution surrounding Q3 2025 guidance. Q2 earnings are expected to be above average, partly due to easier year-over-year comparisons with Q2 2024. However, the market's focus is shifting towards the forward-looking commentary for Q3, which is anticipated to be very cautious. This conservatism is driven by a key macroeconomic event: the expiration of reciprocal tariffs on July 8th. Reinforcing this cautious tone, expected S&P 500 EPS growth rates for both Q2 and Q3 2025 have already been revised sharply lower. In a nuanced detail, Q3 EPS estimates are reportedly holding up slightly better than Q2's, despite the expectation of weak guidance, indicating a complex environment where backward-looking results may not align with forward-looking risks.

Key Decisions for Investors

• Investors should prioritize analyzing forward-looking guidance over backward-looking Q2 results, as the expiration of tariffs on July 8th is likely to make Q3 outlooks the primary market driver.
• It is critical to monitor policy news surrounding the reciprocal tariffs, as this represents a significant risk catalyst that could disproportionately impact sectors most sensitive to international trade.
• Given that EPS growth expectations have already been revised sharply lower, investors should assess whether this reset is fully priced into current equity valuations or if weaker-than-expected guidance could trigger further downside.