This Week in Earnings – Q1'26

Across U.S. Consumer Discretionary and Consumer Staples companies, Q1’26 earnings commentary has been intentionally measured but with an underlying cautiously optimistic tone. Management teams are framing consumer demand as increasingly bifurcated, with inflationary pressures from the ongoing Iran War permeating every aspect of the consumer experience. This has resulted in a more selective consumer, with companies highlighting strategies focused on affordability, digital engagement, and targeted promotions to sustain volume. Staples companies are generally framing demand as more resilient, not robust, citing product breadth and recurring consumption. In contrast, Consumer Discretionary expresses the most caution, highlighting elevated interest rates, higher household costs driven by rising oil prices, and uneven consumer confidence.  

The Street, meanwhile, focused less on reported earnings beats and more on the durability and trajectory of company performance, a theme seen throughout the Q1’26 reporting season. Analysts were keen to understand whether demand improvements were structural or timing-related; how much cost inflation from tariffs and the Iran War is embedded in guidance; and whether any price increases put volumes at risk.  

Tariffs remained a persistent topic on earnings calls. Management teams framed tariffs as a material source of uncertainty, but one they are actively working to manage through clear mitigation plans. Common, yet effective strategies remain centered around sourcing flexibility, supplier negotiations, pricing, and productivity.  

Additionally, tariff refunds are beginning to be addressed, but companies have been careful to distinguish between submitting a refund for processing and receiving an approved refund with a specified dollar amount. Executives, when pressed by analysts about forward guidance, have explicitly stated whether tariff refunds are included in guidance. Most companies have elected to exclude assumptions regarding tariff refunds from their guidance, but those that have (e.g., General Motors) have distinguished between tariffs paid under IEEPA and those paid under Section 232.  

Continuing, some companies have sized the expected impact of the Iran War and are explicitly embedding those expectations into guidance. So far, this appears to be the exception rather than the rule, as the companies opting to include have been Consumer Discretionary companies with material regional exposure.  

Finally, AI continues to be a leading subject on earnings calls, with management teams increasingly discussing its use as an execution and productivity tool. More advanced adopters are positioning their companies’ AI implementation explicitly, directly linking to product experience, customer engagement, revenue opportunities, and other quantifiable real-world outcomes.  

Key Themes

• Macro & Consumer: Dynamic Market Reinforces Bifurcation with Increased Pressure at the Bottom of the K; Companies Reinforce Consumer Value Proposition and Experience as Well as Promotional Strategies
• Iran War: Most Highlight Accelerating Pressures from the Conflict; Hotel and Travel Companies See Direct Impact with Lower Bookings, While Global Restaurant Chains See Little Direct Disruption but Still Expect Second-derivative Headwinds
• Tariff Impact: Companies Beginning to Submit Tariff Refunds but Prudently Exclude from Forward-looking Guidance; Some Including Impact of One-time IEEPA Benefit
• Expense Management: Companies Favoring Cost Management Rather than Broad-Based Consumer Pass-Through to Minimize Consumer Impact
• AI & Digital Acceleration: AI Adoption is Becoming More Practical, Enterprise-Wide, and Commercially Relevant; Companies Lean on Demand Improvement and Customer Engagement