This Week in Earnings – Q3’25

With more than three quarters of the year behind us, companies are closing out 2025 and highlighting entering 2026 with cautious optimism, reflecting an environment of persistent macro uncertainty but gradual stabilization. Across categories, executives cite the positive direction of travel regarding interest rates but also increasing inflationary pressures and mounting tariffs as key variables shaping demand and consumer sentiment. For homebuilders, affordability constraints continue to weigh on sales, though lower rates could provide relief and unlock pent-up demand. Meanwhile, some retailers suggest the consumer environment is bottoming out rather than worsening.

Tariffs remain a defining theme across the landscape, with companies actively mitigating headwinds through pricing, supply chain diversification, and onshoring or reshoring while waiting on “clear rules of engagement”. Import-reliant companies are absorbing near-term cost pressures while executing long-term strategies to spread sourcing risk and reduce dependence on China. Conversely, domestic manufacturers view the current tariff environment as a competitive advantage, reinforcing their strong U.S. production bases. While tariffs continue to add operational complexity, most companies express confidence that mitigation playbooks will offset structural cost impacts over time.

The consumer is cautious but resilient, echoing the sentiment by Big Banks. The dichotomy between income levels continues, with higher-income consumers willing to spend selectively on premium experiences, while middle- and lower-income households are showing signs of value-conscious trade-down behavior. Overall, sentiment remains cautious but not collapsing — consumers are still spending, but with greater scrutiny.

Across the board, companies are driving efficiency and margin improvement through disciplined cost control, restructuring, and lean initiatives. While all are optimizing pricing, some are also pursuing multi-year transformation programs to lower structural costs and expand margins. Simultaneously, the sector is accelerating AI and digital adoption. Companies are integrating with OpenAI, building AI powered chatbots, leveraging agentic AI, and deploying advanced tools to automate workflows, enhance customer interactions, and unlock productivity gains.

Globally, performance remains uneven. While U.S. consumers remain more resilient, internationally, Asia (sans China) is leading growth with strong momentum in India, Japan, and Korea, while Europe continues to face pricing pressure and soft demand.

Key Themes

• Macro & Outlooks – Cautious Optimism Remains as We Look Ahead to 2026, Reflecting a Mixed Macro Backdrop Defined by Persistent Uncertainty but Emerging Stabilization; Tariff Volatility and Inflation Pressure On One Side and Interest Rate Direction On the Other Influence Demand and Consumer Sentiment
• Tariffs – Companies are Deploying Mitigation “Playbooks” To Offset Tariffs, Including Pricing, Supply Chain Diversification, and Product Localization Tactics with Near-term Cost Pressures Expected to Ease Over Time; Domestic Manufactures View Tariffs as an Advantage
• The Consumer – Cautious but Resilient, Prioritizing Essentials and Value while High-income Consumers Selectively Spend on Premium Experiences; Overall Sentiment Hinging on Improving Confidence and Rate Stability Heading Into 2026
• Margin & Cost – Companies Driving Margin Expansion through Disciplined Cost Control, Operational Efficiencies, and Restructuring…Including Headcount Reductions; Executives Positioning for Steadier Profitability Despite Ongoing Macro and Tariff Headwinds
• AI & Digital Acceleration – Companies Embracing AI and Digital Tools as Core Enablers of Efficiency, Personalization, and Growth; Organizations Moving from Experimentation to Large-Scale Implementation…and Providing Hard Stats
• Around the World – Global Trends Gradually Improving, Asia’s Growth Led by India, Japan, Korea, and China’s Selective Recovery; Softness and Pricing Pressures Remain in Europe