A solid earnings season reveals tech strength and consumer weakness

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In the absence of key government data, corporate earnings are even more important.

This quarter’s results have taken on greater importance, offering a guidepost as investors navigate ongoing trade battles, lingering inflation, and a flagging labor market. A midseason snapshot suggests corporates are humming along, as a glance at stock portfolios might tell you.

But there’s also an undercurrent of unease, as earnings commentary suggests that last season’s affordability woes are still with us.

Through Wednesday of last week, 81% of S&P 500 companies beat EPS consensus, while 76% beat on sales, according to a note by a team from RBC Capital Markets led by head of US equity strategy research Lori Calvasina. Both measures are down slightly from the team’s prior update. And while EPS beats remain slightly above last quarter’s levels, sales beats are now tracking slightly below the prior season.

“We continue to think earnings are providing a solid foundation for the US equity market,” the analysts said. But, they added, “earnings sentiment is still tracking a notch below what we saw in the last reporting season, suggesting the best part of the earnings story may be behind us.”

While names in the tech sector cited strength in AI and mobile, earnings commentary from consumer companies offered a critical take on where things stand.

Tariffs featured as a major theme. Some companies highlighted the rush of shoppers making purchases earlier in the year to get ahead of levies, according to the note. There was also talk of ongoing hesitancy to make decisions because of tariff-related uncertainty, as well as margin pressures and weakness in hiring.

“The Consumer-related companies that reported last week continued to describe a price-sensitive and value-conscious consumer,” the analysts found.

Executives at Kimberly-Clark, for instance, noted during earnings that they don’t see a catalyst to ease pressure on consumers in the near term. The consumer goods and personal care company, which makes Huggies diapers and Kleenex, agreed on Monday to buy Kenvue, the owner of Tylenol and Listerine, for more than $48 billion.

Other names described worsening consumer sentiment, the analysts said, highlighting ongoing affordability challenges with housing, shorter length of stays in travel, lower demand for vehicle repairs, and pressures on dining out among low- to middle-income customers and young adults. And amid all this, only partial SNAP payments will be made while the government is shut down.