This Week in Earnings – Q3'25

As Q3 earnings season progresses, the Industrial landscape continues to reflect a stable but mixed operating environment, in line with the diverse nature of the sector and consistent with findings from our recently published Q3’25 Industrial Sentiment Survey®.

Macro commentary points to a modestly improving backdrop with emerging tailwinds, though demand remains inconsistent and executives continue to balance optimism with caution. Defense, AI/data center, and utility-linked segments stand out as clear bright spots, supported by sustained investment and secular growth trends, while airlines note an acceleration in business travel demand. Conversely, transportation, general industrial, and consumer-facing categories remain sluggish, with a sharper focus on cost control and operational discipline over volume-driven growth.

Tariffs remain a central theme, with several companies citing rising margin pressures and the potential for peak impacts on the horizon. Firms continue to cite effective mitigation strategies through supply chain adjustments and pricing actions, though input cost pressures are still evident. Those benefiting from strong demand underscore their ability to pass on higher prices as a key lever to offset the impact of rising input costs.

On the policy front, OBBBA-related tax and R&D incentives are viewed as supportive, though discussion has shifted toward the potential impact from the U.S. government shutdown. To date, companies report limited direct effects but acknowledge potential headwinds if a near-term resolution fails to materialize.

Globally, executives present mixed views. Trends in Europe mirror the U.S. — bifurcated by strong demand for commercial projects amid softer consumer demand — while China and Brazil are mixed, and India infrastructure activity remains solid.

Overall, the tone this quarter remains measured. Momentum and visibility have improved in select segments, yet persistent macro uncertainty and divergent end market trends continue to define the industrial outlook heading into year end.

Key Themes

• Macro & Outlook – Uneven Environment with Signs of Stabilization and Emerging Tailwinds Alongside Continued Broader Industrial Softness and Lingering Macro Uncertainty; Some Signal Greater Potential for Tailwinds in 2026
• Demand & Growth – Sector Remains a “Mixed Bag”; Strength in Defense, AI/Data-centers, Utilities, and Travel, Offset by “Sluggish” End Markets Elsewhere
• Tariffs & Trade Policy – Margin Headwinds Mounting but Expected to Peak Soon; Companies Continue to Lean on Supply Chain and Pricing Actions
• Pricing – Amid Rising Input Costs, Firms Pass Through Price Increases Where Demand Allows
• U.S. Policy & Government Shutdown – OBBBA Tailwinds Persist, but Heightened Shutdown Uncertainty Clouds Outlook
• Around the World – Europe Mirrors U.S. with Project Strength But Softer Consumer Demand; China and Brazil Mixed, India Steady