Marilyn D. from Charlotte, NC asks: Hi Mitch, with third-quarter earnings season kicking off, what’s your take on how companies are holding up? It doesn’t seem like tariffs are having the impact people thought they would, and the stock market doesn’t seem to be showing any signs of strain.
Mitch’s Response:
Long-time readers of my columns know how important corporate earnings are as a driver of stock market returns, so your question really gets to the heart of the matter for investors. We’re also just at the start of Q3 reporting season, so your timing is great, too.1
Before I dive into some details, my high-level takeaway for you is that so far, the earnings setup looks better than many expected over the summer.
Estimates for S&P 500 earnings have actually risen in recent months, which is generally the opposite of what we tend to see. Corporations usually want to hedge against setting expectations too high, so they lower earnings guidance throughout the quarter. In aggregate, companies are doing the opposite today.
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Zacks’ analysts now expect profits to grow roughly 8% year over year, which, if realized, would mark the ninth straight quarter of earnings growth. And if history is any guide, the final number could end up even higher. We find that actual results tend to exceed estimates by around 5–8% each quarter, which means we could easily be looking at double-digit profit growth by the time all is said and done.
The sectors leading that strength may sound familiar: Technology, Financials, Utilities, and Materials. Tech is expected to post earnings growth of about 21%, thanks largely to semiconductors and software, while Financials are looking at roughly 13%. Utilities and Materials are also seeing double-digit gains, a sign that the recent manufacturing and energy slowdowns aren’t weighing on every corner of the economy. Revenues tell a similar story, with expectations for 6% growth, marking the twentieth consecutive quarter of top-line growth for S&P 500 companies.
To be fair, some industries are still showing signs of weakness. The Energy sector faces a 4% decline amid lower oil prices, and Consumer Staples companies are feeling margin pressure. Yet despite these pressures, overall earnings continue to advance. This is a clear sign of corporate resilience and the ability of U.S. firms to adapt to higher costs and ongoing uncertainty.
That resilience has been a quiet but powerful driver of markets in 2025, in my view. It’s easy to get caught up in headlines about tariffs, Fed policy, and political noise, but the underlying truth is that company profits have kept growing. When earnings are expanding and balance sheets remain healthy, markets tend to have a solid foundation for rising as well.
Looking ahead, Zacks sees another 7–12% earnings growth in the quarters ahead and nearly 11% for all of 2025. Valuations are above average, with the S&P 500 trading at about 23 times forward earnings, but that’s not unprecedented in periods of solid profit growth and easing inflation. In my view, the broader takeaway is constructive: corporate America keeps proving more durable than doubters give it credit for.
In the end, markets favor investors who stay aligned with fundamentals—not distractions.
Corporate earnings continue to prove more durable than many expect, and for those planning retirement, the key is building a portfolio that can adapt through every phase of the cycle.
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- Accurately forecasting your retirement income needs
- The two phases of determining your asset allocation
- Developing an investment discipline that allows you to get good results over time
- Avoiding self-sabotage—what you need to know
- Plus, our views on key steps to create and maintain the ultimate retirement portfolio
If you have $500,000 or more to invest, download our guide today!
Disclosure
1 Zacks.com. October 6, 2025. https://www.zacks.com/commentary/2766673/q3-earnings-season-setup-remains-favorable-what-to-know
2 ZIM may amend or rescind the “7 Secrets to Building the Ultimate DIY Retirement Portfolio” guide for any reason and at ZIM’s discretion.
3 ZIM may amend or rescind the “7 Secrets to Building the Ultimate DIY Retirement Portfolio” guide for any reason and at ZIM’s discretion.
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