Commencing the Quarter – Q2’25

Earnings season is quickly approaching!

Every quarter, we analyze earnings communication trends for off-cycle companies reporting over the past month to identify important themes and precedence. These companies span market cap sizes and sectors.

In-line with preliminary findings from our Inside The Buy-Side® Earnings Primer® — to be released Thursday, July 10 — earnings commentary reflects a generally balanced tone, with executives remaining cautious due to ongoing macro uncertainty, yet expressing optimism about their ability to adapt and manage near-term headwinds. While echoing many of the big themes seen during the height of Q1 earnings, they also contain glimmers of improved sentiment relative to the April/May reporting timeframe.

Regarding tariffs, companies continue to detail expected impacts and progress with mitigation strategies, touting flexible “in-region for-region” supply chains, diversified sourcing, and targeted pricing actions. Further, several companies framed price increases as a “last resort”, with the bulk of those coming from consumer-facing industries. Notably, numerous companies flagged an acceleration in the trend of higher-income consumers shifting toward value-seeking behavior.

On the demand front, trends vary across sectors and end markets. Executives point to elevated interest rates, a weak Spring housing market, downbeat consumer sentiment, and cautious corporate spending patterns among myriad headwinds, while areas tied to AI-driven demand remain strong, including data centers and technology solutions aimed at driving productivity and efficiency improvements.

Commentary reveals companies are taking a hard look at costs and “prudently” managing expenses in the near term, while still making strategic investments to streamline operations and deliver long-term profitable growth. At the same time, execs continue to highlight downturn playbook levers at their disposal to offset headwinds should conditions deteriorate further.

Globally, the picture is mixed, with India and Latin America exhibiting strength, offsetting weaker trends in North America. Demand in Western Europe remains largely challenged, albeit with increased defense spending cited as a bright spot. Views toward Southeast Asia are more upbeat, though China’s recovery remains uneven amid ongoing consumer pressures.

Key themes from our analysis:

• Macro & Outlook – Uncertainty Remains amid “Volatile” Macro Conditions, Tariffs, and Consumer Fragility; Execs Balance Cautious Guidance with Confidence in Ability to Adapt
• Demand – Uneven Trends with Elevated Interest Rates, a Soft Housing Market, and Macro Uncertainty Serving as Drags; Data Centers and AI-driven Demand Remain Bright Spots; Mixed Signals on Tariff-induced Pull-forward
• Operational Balancing Act – Companies Navigate Uncertainty by “Prudently” Managing Costs While Investing Strategically for Profitable Long-term Growth 
• Tariffs & Mitigation – Companies Leverage Supply Chain Flexibility, Diversified Sourcing, and Pricing Strategies to Manage Impact through 2025 and Beyond; Some Frame Raising Prices as “Last Resort”
• The Consumer – Cautious Spending Trends and Trade-downs Continue as Higher-income Groups Flock to Value Retailers to Stretch Budgets
• Around the World – Regional Trends Diverge with India and LatAm Standout Growth Engines Amid a Softer Backdrop in North America and Europe; Some Bright Spots in Asia, Though China Recovery Remains Uneven