European Companies Brace for the Weakest Earnings Stretch in Nearly Two Years

European corporations are heading into the latest earnings season under growing pressure, with forecasts pointing to the weakest profit performance in almost two years. Rising geopolitical uncertainty, fragile economic growth, and unresolved trade questions are weighing heavily on expectations for the final quarter of 2025, setting a cautious tone across markets.


Profits Under Pressure as Uncertainty Builds

Earnings across Europe are expected to decline in the fourth quarter, marking the sharpest setback in seven quarters. Recent projections show a deeper drop than previously anticipated, reflecting worsening sentiment as companies grapple with volatile global conditions. Slowing demand and tighter trade dynamics have combined to erode confidence in near-term profitability.


Why This Earnings Season Matters

The outlook comes at a sensitive moment for Europe’s economy, which is already struggling with muted growth. A pending legal decision in the United States over the future of key trade measures has added another layer of uncertainty, with potential ripple effects for global commerce. While investors remain wary ahead of results, European stock markets have paradoxically pushed to record highs, suggesting optimism about longer-term resilience despite near-term earnings pain.


Revenue Growth Also Losing Momentum

It is not just profits feeling the strain. Corporate revenues are also expected to contract compared with last year, reinforcing concerns that companies are finding it harder to grow sales in the current environment. The downgrade in revenue expectations underscores how persistent economic headwinds are starting to bite more broadly.


A Stark Contrast With the U.S.


The gloomy European outlook stands in contrast to expectations elsewhere, particularly in the United States, where companies are projected to post solid earnings growth. This divergence highlights differing economic momentum across regions and raises questions about Europe’s competitive position in the global recovery.


Caution, But Not the Final Word

Despite the bleak forecasts, history offers a note of caution. Early earnings projections have often underestimated final results, and European companies have previously surprised markets with stronger-than-expected performances. As reporting season unfolds, investors will be watching closely to see whether reality proves less severe than current expectations suggest.