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Europe's Earnings Surge, But AI Growth Lags US
16 Jul
Summary
- European blue-chip earnings expected to grow 15.3% in Q2.
- Energy sector earnings surge masks weaker non-energy growth.
- US companies forecast 23.7% earnings growth, outperforming Europe.
European companies are anticipating their most robust earnings season in more than three years, with projections indicating a 15.3% average profit growth for blue-chip firms in the second quarter. This significant uplift is primarily attributed to a surge in energy company earnings, influenced by elevated crude oil prices. The anticipated earnings growth for U.S. companies is projected at 23.7% on average.
Excluding the energy sector, the performance gap becomes more pronounced. European companies within the STOXX 600 index are forecast to see a 6% average earnings increase, starkly contrasting with the 19.6% growth expected from U.S. S&P 500 companies. This divergence is partly due to the U.S. leading in AI-powered growth opportunities.
Investors are now focusing on company guidance for demand and profits into 2027, as current earnings expectations are largely factored into valuations. ASML, a key supplier of chip-making equipment, recently raised its 2026 sales forecast, offering an early glimpse into AI opportunities. However, higher energy prices are impacting consumer sentiment and affecting sectors like autos, which face reduced demand in China.
