This Week in Earnings – Q2’25

Overall, management teams strike a more balanced tone relative to last quarter, trading the overtly cautious stance expressed during Q1 for one of “better than previously expected” but “still cautious” coming out of Q2. Persistent macro uncertainty, shifting tariff policy, and subdued consumer sentiment remain front and center, with concerns around margin pressures and demand volatility weighing on outlooks. In addition, tariff-related order disruptions and aggressive pricing from foreign competitors created unique challenges for select companies.  

Indeed, while Consumer Discretionary companies are delivering Q2 beats at a healthy clip, our analysis finds the sector lowering full-year EPS guidance at more than double the rate of our All-Company average. Further, while some of those that withdrew annual guides in Q1 have moved to reinstate guidance this quarter, half of the ten companies tracked across the sector thus far have continued to withhold as they await greater clarity on trade policy. 

Tariffs continue to dominate Q&A, with executives largely noting impacts in Q2 were less than feared due to early mitigation actions and timeline extensions. Still, execs point to a challenging and fluid environment, with many anticipating rising costs and greater tariff headwinds in the second half. The ability to pass on higher prices without triggering demand destruction is a growing concern, with companies watching closely for signs of consumer fatigue and pushback. 

To that end, consumer health remains a nuanced story. While spending has been holding up in aggregate, the “discerning and value-seeking” theme persists with continued talk of deferrals on big ticket purchases. Still, travel and leisure remains a notable bright spot. Globally, trends are mixed, with the U.S. consumer proving more resilient than peers in Europe and China, and select markets in APAC and the Americas showing pockets of strength. 

Finally, the recently passed OBBBA tax bill is emerging as a new tailwind, with bonus depreciation and other tax relief measures expected to boost cash flow and investment appetite for some companies. However, most are still assessing the impact, and the flow-through to consumer behavior remains to be seen. 

Key Themes

• Macro & Outlooks: Cautious Optimism Emerges Despite Challenging Macro Environment and Tepid Consumer Confidence; Some Reinstate FY Guides Pulled in Q1, While Several Continue to Withhold amid Ongoing Tariff Uncertainty
• Tariffs: Q2 Impacts Limited by Tariff Timing and Early Mitigation Actions, but Companies Brace for Impact – and Increased Margin Headwinds – in the Second Half
• The Consumer: “Hanging In”, But Discerning (a Continuing Trend); Value-Seeking and Big-ticket Deferrals Persist, While Robust Travel Demand Remains a Bright Spot
• Costs & Pricing: Companies Take Cautious Approach to Tariff-Driven Price Increases, Watching Closely for Demand Sensitivity and “What the Consumer Can Bear”
• OBBBA Impact: Bonus Depreciation and Tax Relief Cited as Key Tailwinds, with Some Quantifying FCF and Capex Benefits; Flow-Through from Consumer Uptake of New Incentives Still TBD
• Around the World: U.S. Resilience Persists; Europe and China Remain Pressured, While APAC and Latin America Present Growth Opportunities