STOXX 600: Stronger-Than-Perceived Q2 Earnings Growth Led by Energy and Technology

With roughly 54% of companies in the STOXX Europe 600 having reported Q2 results, the index is showing aggregate earnings growth of ~23% on a reported basis. This compares to 11.5% growth that analysts had projected as of the end of March. Sales growth is running at 9.8%, modestly ahead of the 4.3% pace expected three months earlier. The overall EPS surprise stands at 3.4%, with the sales surprise at 1.0%. Mean and median figures remain closely aligned across both metrics, pointing to relatively broad-based results rather than heavy skew from a small number of large-cap names.

Goldman Sachs noted that the median stock is delivering ~7% earnings growth, close to the median stock in the S&P 500. Complete Q2 earnings are now expected at ~20.8% (or 10.3% ex-Energy), while revenue is expected at +11.7% (or 7.6% ex-Energy). Goldman Sachs noted H1 EPS growth now tracking at 13% y/y, the strongest pace in three years. The prevailing narrative that Europe is struggling to generate earnings growth sits increasingly at odds with the data.

Analysts also noted that positive estimate revisions have spread across virtually every sector since the start of the reporting season (the only clear exceptions being Basic Resources and Consumer Discretionary), and earnings sentiment—measured as upgrades minus downgrades—has climbed to its highest level in more than three years.

Energy and Basic Materials Deliver Explosive Growth While Consumer Discretionary Contracts

Energy remains the clear standout, posting reported EPS growth of 116% against a sales increase of 35%. Basic Materials is not far behind with EPS growth of 95%, even as its sales rose a more restrained 6%. Technology follows at a still-healthy 19% EPS growth and 15% sales growth.

At the opposite end, Consumer Discretionary has reported a 13% earnings decline despite essentially flat sales. Real Estate and Consumer Staples are also lagging with low-single-digit EPS gains. Margin expansion appears evident in Energy, Basic Materials, Telecommunications, Health Care, Industrials, Utilities and Technology, where EPS growth is running well ahead of sales. Consumer Discretionary and Real Estate appear to show margin compression.

Half of Companies Beat EPS Estimates as Sales Beats Remain Robust

~51% of reporting companies have beaten EPS estimates, with 13% in-line and 37% missing—broadly in-line with historical averages. That beat rate is led by Technology at 71%, followed by Financials at 69%, and Health Care at 67%. Energy is also performing well at 65%.

By contrast, only 25% of Consumer Discretionary companies and 10% of Telecommunications names have beaten EPS expectations. On the sales side the picture appears stronger, with 74% of companies beating estimates, less than 1% in-line, and 26% missing. Technology again leads at 82%, with Financials and Real Estate both at 80% and Industrials at 79%. Telecommunications and Utilities trail with sales beat rates in the mid-50% range.

The combination of solid beat rates, positive surprises and margin expansion currently places Technology at the top of the earnings-quality ranking, followed by Energy and Financials. Consumer Discretionary ranks at the bottom.

Markets are rewarding beats and penalising misses more forcefully than usual, with an average relative price reaction of ~2% on results day. The main exception has been a handful of AI-exposed technology names that were not rewarded, despite beating estimates.

Sales Growth Normalizes with Clear Sector Divergence

Revenues have continued to normalize, with the index delivering 9.8% aggregate sales growth. Energy continues to outpace the rest of the region at 35%, while Technology is the next strongest at 15%. Most other sectors are clustered in the mid-to-high single digits, though Consumer Staples and Telecommunications have slipped into negative territory.

The sales results show a higher percentage of beats than the historical norms implied by earlier seasons, yet the dispersion across sectors remains pronounced. Forward estimates have also moved higher since March, with consensus now looking for roughly 20% EPS growth in the third quarter and full-year 2026, up from the mid-teens levels projected three months ago.

Taken together, the season so far appears to present a constructive but uneven picture. Energy is driving the bulk of the index-level earnings upside and margin expansion, while Technology and Financials appear to be delivering the most consistent beats. Soft spots in Consumer Discretionary and Telecommunications remain the principal areas of caution as the reporting season continues.

Source: FactSet

Source: FactSet

Source: FactSet

Source: FactSet

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