This Week in Earnings – Q4'25

Consumer companies are entering 2026 with cautious outlooks, expecting another year defined by macro volatility, geopolitical uncertainty, and a highly promotional operating environment. While moderating inflation and future rate cuts are expected to provide some relief, particularly in rate-sensitive categories such as housing and big-ticket discretionary, management teams are not expecting a sharp rebound.  

The consumer remains pressured and distinctly bifurcated. Lower- and middle-income households continue to trade down, seek value, shift channels, and manage tighter budgets through smaller baskets, private label adoption, and increased promotional sensitivity. At the same time, higher-income consumers remain comparatively resilient, supporting premium, innovation-led, and discretionary categories. This tale of two consumers dynamic is reinforcing a value-oriented, promotion-heavy environment in which pricing power is more selective and closely tied to perceived value. 

Tariffs remain a meaningful headwind entering 2026, creating incremental cost and margin pressure across industries. While some companies have successfully mitigated impacts through pricing and supply chain diversification, tariff costs are not fully offset. The environment remains dynamic, with timing lags, cash flow implications, and demand elasticity all influencing how effectively companies can absorb or pass through costs. This is most notable for staples companies where guidance ranges are wider year-over-year. 

Against this backdrop, expense management remains a central lever to protect profitability. Companies continue to execute structural cost reduction programs, productivity initiatives, and supply chain optimizations to drive meaningful savings. These efforts are funding targeted growth investments while helping offset inflation, pricing pressure, and tariff-related costs.  

At the same time, AI and digital acceleration are emerging as key strategic enablers. Companies are moving beyond experimentation toward scaled, enterprise-wide deployment of AI across supply chain, operations, finance, marketing, and digital commerce. These investments are driving automation, efficiency gains, cost savings, and enhanced customer engagement, while freeing up organizational capacity to reinvest in innovation and growth.  

Globally, performance remains uneven, with strength in North America, parts of Latin America, the UK, and select Asia markets offsetting softness in Europe and China, underscoring the importance of regional agility and diversified growth strategies in a complex macro landscape. 

Key Themes

• Macro & Outlook – Companies Broadly Expect a Volatile and Promotionally Competitive 2026, with Persistent Geopolitical and Demand Headwinds Partially Offset by Easing Rates and Moderating Inflation
• The Consumer – A Tale of Two Cities with Lower-income Households Pressured, Value-focused, and Trading Down Amid Stretch Budgets and Higher-income Consumers Remaining Relatively Resilient, Reinforcing a Bifurcated and Promotion-sensitive Demand Environment
• Tariff Impact – A Still-fluid Environment Remains a Meaningful and Volatile Cost Headwind Entering 2026, Pressuring Margins and Demand; Companies Relying on Pricing, Supply Chain Diversification, and Cost Actions to Partially Offset the Impact
• Expense Management – Continued Emphasis on Structural Cost Reduction and Productivity Initiatives is Driving Meaningful Savings, Funding Growth Investments, and Helping Offset Inflation, Pricing Pressure, and Tariffs
• AI & Digital Acceleration – Companies Continue to Expand AI Deployment to Drive Automation, Efficiency, Cost Savings, and Enhanced Customer Engagement Across Supply Chain, Operations, and Digital Commerce
• Around the World – Regional Performance Remains Uneven; Strength in North America, Parts of LatAm, the UK, and Select Asia Markets with Ongoing Softness in Europe and China amid Broader Macro and Discretionary Spending Pressures