European Firms Face Worst Earnings Drop in Seven Quarters

Projected Q4 Earnings Decline for European Companies

European corporations are forecast to experience their most significant earnings decline in the past seven quarters. According to LSEG I/B/E/S data, a 4.1% average drop in fourth-quarter 2025 earnings is expected, worsening from the 3.9% decrease projected just a week ago.

Market Overview

This negative outlook surfaces amidst sluggish economic growth and geopolitical uncertainty. Corporate revenues are also anticipated to shrink by 2.9%. In a notable contrast, major European stock indices, including the FTSE, DAX, and STOXX, have recently surged to record highs, indicating a divergence between market sentiment and corporate performance forecasts.

Economic and Market Impact

The situation in Europe starkly differs from the United States, where S&P 500 companies are projected to report an 8.8% earnings growth. However, it is crucial to remember that initial forecasts are not always definitive. For instance, after months of negative predictions, STOXX 600 companies ultimately delivered a 7.3% year-on-year earnings growth in the third quarter of 2025.

Summary

Investors are now closely watching to see if European companies will outperform these lowered expectations. The market's direction will likely be influenced by the actual results, alongside ongoing geopolitical developments and the uncertain global trade environment.

FAQ

Q: What is the expected earnings decline for European companies in Q4 2025?
A: LSEG I/B/E/S data forecasts a 4.1% average decline in earnings, which would be the worst performance in seven quarters.

Q: How does this forecast compare to the performance of U.S. companies?
A: It is in sharp contrast, as S&P 500 companies are expected to report an average earnings growth of 8.8% for the same period.

Source: Investing.com