What tariffs? S&P 500 companies are wrapping up one of the strongest earnings seasons on record.
The big lesson so far? Tariffs aren't yet weighing on companies' bottom line.
When President Donald Trump began implementing tariffs early in 2025, it sparked concerns that the import duties would result in a hit to earnings growth. Yet, while uncertainty remains elevated, S&P 500 companies are wrapping up a stellar season of quarterly reports.
In an August 15 note to investors, Goldman Sachs analyst David Kostin said that companies in the benchmark index had shown more resilient profit margins than many expected, helped in a big way by the steady weakening of the US dollar this year, which has helped drive sales growth overseas.
"Corporations have continued to message their ability to maintain their margins by negotiating with suppliers, adjusting supply chains, passing through prices to consumers, and cutting other costs," Kostin said.
Indeed, this earnings season, 58% of companies increased their full-year guidance for 2025, doubling the number from the first quarter. Aggregate S&P 500 earnings rose 11% on a year-over-year (YOY) basis, almost 3x the consensus expectation of 4%, and 84% of companies overall have beaten Wall Street's estimates.
"With the 2Q 2025 earnings season nearly complete, the quarter has been marked by one of the greatest frequency of earnings beats on record," Kostin said.
While Nvidia doesn't report earnings until August 27, its Magnificent 7 peers reported mostly strong results, excluding Tesla, which saw a steep decline in year-over-year revenue.
"Earnings results have continued to be exceptional for the mega-cap tech companies," Kostin wrote. "The Magnificent 7 apparently grew EPS by 26% year/year in 2Q, a 12% beat relative to consensus expectation coming into earnings season."
They see this trend as likely to continue, noting that analyst estimates predict nominal sales growth will remain roughly stable for both large and small-mid cap companies through the end of 2025.
Kostin and his team said that while they expect to see many S&P 500 companies maintain high profit margins in the coming quarters, they see analyst margin forecasts for 2026 as overly optimistic.
"While companies remain confident in their ability to mitigate the cost pressures imposed by tariffs, and arithmetically the superior margins of the largest technology companies should continue to boost margins for the aggregate index, we see little reason to expect a large increase in profit margins next year."
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