Global Earnings Underscore Shift From US as S&P 500 Slumped

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“You can pay 16 times forward earnings in Europe or 23 times in the US for what consensus expects to be similar earnings growth by 2027,” said Adrian Helfert, chief investment officer of multi-asset strategies at Westwood Management. “My highest conviction region right now is the euro zone, specifically European industrials, defense and banks. This isn’t a ‘hide from the storm’ trade, it’s a structural re-rating story that’s only in the early innings.”

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Mixed Messages in US

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In some cases, the earnings at large-cap tech companies like Nvidia Corp., Amazon.com Inc. and Microsoft Corp. were poorly received given a combination of sky-high expectations and high valuations. Nvidia fell despite beating on sales and forecasting a huge revenue haul over the rest of the year. Tech firms in the S&P 500 powered the earnings growth, but most of that was priced into the stocks — the so-called ‘Magnificent Seven’ group has fallen 7.0% since the start of the year.

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“The US earning season has brought an increase in disappointment,” said Tim Hayes, chief global strategist at Ned Davis Research, in a note this week. 

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On the positive side, though, was the growth registered outside of Big Tech, which is expected to converge in 2026, according to Bloomberg Intelligence. The increase in profit expansion among the rest of the S&P 500 justifies a “catch up” in those share prices and doesn’t signal “a collapse in the magnificents,” said Michael Casper, an analyst with BI. That’s good news for equity bulls.

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Then there are some investors who see the rotation from tech as overdone. “Now there are bargains,” Jay Hatfield, CEO and founder at Infrastructure Capital Managment LLC, said, noting that Amazon is trading at a lower price-to-earnings ratio than Walmart Inc., while offering a sharper growth outlook.

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Peak Growth?

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Gina Martin Adams, chief market strategist at HB Wealth Management, said the relatively robust US earnings season this time failed to provide a positive catalyst to stocks because companies may have already delivered their best growth rates. 

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“One of the most interesting things that happened so far this year is usually earnings season is very uplifting. We did not see that this time around,” she said. 

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Her theory is investors are adjusting to predictions for slower profit gains, with current consensus showing 2026 growth may merely match that of 2025, rather than exceeding the previous year’s rate. S&P 500 revenue growth may have hit peak pace in the fourth quarter last year at 8.1% year on year, which was the fastest growth since 2022, according to HB Wealth. (WE MEAN 13% HERE? no it’s revenue not earnings so that’s about right. BI has 8.5% in 4q25) 

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“This loss of momentum in fundamentals could help explain the loss of momentum in the market at large,” she said. “We need to see analysts coming out with positive revisions.”  

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Europe’s AI Split

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In Europe, the latest updates have underpinned a trend that has been ongoing for several quarters. Consumers stocks, whether discretionary or staples, are still struggling, while financials, technology and industrial businesses have shown positive momentum.  

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Separately, AI overwhlemed earnings for companies in sectors that could be at risk from the new technology. In many cases, sentiment was a bigger driver than fundamentals. Cap Gemini SE, an IT services firm, published reassuring results, but the stock is still languishing after a 34% drop sparked by worries of AI disruption.