Europe's 1Q26 earnings season is nearing its end; positive earnings beats remain but are more concentrated

Overview

This report is Goldman Sachs' late-season update on Europe's 1Q26 earnings season, with core coverage of the STOXX Europe 600 and related sectors, thematic baskets, and cross-asset performance. The report shows that the bulk of the earnings season is now over, with more than 280 companies having reported, representing about 75% of the market cap still to be disclosed. Overall earnings surprises remain positive, but the positive contributions are concentrated in financials, energy, basic resources, chemicals, and some consumer companies; meanwhile, strong order books coexist with slower sales conversion, cost pressure, and macro uncertainty.

Core views

Goldman Sachs' main view is that positive earnings surprises in Europe are still present, but the quality and breadth are limited. On a market-cap-weighted basis, EPS beat expectations by about 2.3%, slightly below the historical average; on an equal-weighted basis, SXXP average earnings surprise is about 1.7%, or about 1.3% excluding financials. Financials and commodity-related sectors continue to support overall earnings, while upstream activity, LNG trading profits, and energy cash flow have been strong. Capital goods orders are being lifted by demand from AI and data centers, but about 70% of sales conversion has missed expectations, and about 50% of companies' margins have come in below expectations because of input costs. In terms of market reaction, the penalty for earnings misses is more pronounced, while the reward for beats is limited, suggesting investors remain cautious about earnings quality, guidance credibility, and macro uncertainty.

Analysis framework

The report tracks earnings and sales surprises using both equal-weighted and market-cap-weighted measures, and combines actual results, market expectations, company guidance, relative share-price reactions, sector EPS revisions, and thematic basket performance. Its comparison dimensions include the overall SXXP, the index excluding financials, sector groups, European thematic baskets, and cross-asset total returns.

Methodology notes

• earnings_analysisEarnings surprise tracking

  Compare reported companies' actual EPS with consensus estimates, distinguishing positive, flat, and negative surprises.

  The report uses both equal-weighted and market-cap-weighted measures to avoid conclusions being dominated by either large companies or sample size alone, and assesses whether the magnitude of surprises is above the historical average.

• market_reactionRelative share-price reaction on announcement day

  Compare a company's relative performance against the market on the day it reports results or guidance.

  This method is used to judge whether the market rewards earnings beats, punishes misses, and whether price reactions to guidance deviations from consensus are stronger than historical norms.

• guidance_analysisCompany guidance versus consensus

  When a company provides range guidance, match the midpoint to consensus expectations.

  The report notes that about 140 SXXP companies have issued 2026 guidance for at least one key financial metric, with about half below analyst expectations, but their announcement-day performance was broadly in line with the market.

• factor_themeGoldman Sachs thematic basket analysis

  Use GSSTCAPI, GSSTDIVG, GSSTSBAL, and similar thematic baskets to observe market preferences and the direction of earnings revisions.

  Capital-intensive, dividend-growth, strong-balance-sheet, and international-exposure baskets have performed well, while weak-balance-sheet and high-labor-cost baskets have lagged.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• STOXX Europe 600 (SXXP)

  Core tracking index

  Strengths

  High reporting progress, overall positive earnings surprises, and a higher share of positive absolute surprise companies than negative ones.

  Weaknesses

  Average surprise is below the historical average, and the market reward for earnings beats is limited.

  Comparison

  Excluding financials, average earnings surprise falls from +1.7% to +1.3%, showing that financials are supporting the overall result.

  Risks

  Macro uncertainty, lower guidance credibility, and intensified share-price punishment for negative surprises.

• Financials

  One of the main contributors to positive earnings surprises

  Strengths

  Financial companies report relatively frequently and continue to drive positive earnings surprises.

  Weaknesses

  The concentrated contribution may mask insufficient breadth across other sectors.

  Comparison

  SXXP's average earnings surprise excluding financials is lower than the overall index.

  Risks

  Changes in the rate and credit environment may affect subsequent earnings momentum.

• Energy and EU Big Oils

  Sector supported by commodity-linked earnings revisions and cash flow

  Strengths

  EU big oil companies delivered 1Q26 operating cash flow 9% above expectations, and the energy sector is driving EPS revisions.

  Weaknesses

  Capex was higher than expected, which may reduce some free cash flow flexibility.

  Comparison

  Energy is one of the strongest sectors in the performance charts and has significantly outperformed both since the start of the 1Q26 earnings season and since the Iran war.

  Risks

  Oil and gas prices, LNG trading profits, upstream earnings, and geopolitical changes may create volatility.

• Basic Resources and Chemicals

  Beneficiary of commodity and cost pass-through

  Strengths

  Earnings revisions are positive for basic resources and chemicals, and chemical producers can pass higher input costs on to downstream customers.

  Weaknesses

  The sectors are highly cyclical and performance may depend on commodity prices and end-demand.

  Comparison

  Equal-weight average surprise is about +5.5% for chemicals and +5.6% for basic resources, both above the SXXP overall +1.7%.

  Risks

  Weak downstream demand or failed cost pass-through could weaken earnings revisions.

• Capital Goods

  Order momentum sector driven by AI and data center demand

  Strengths

  77% of Goldman Sachs-covered companies beat order expectations, driven by AI and data center demand.

  Weaknesses

  About 70% of sales conversion missed expectations, and about 50% of margins were below expectations.

  Comparison

  Strong orders contrast with revenue recognition and margin pressure.

  Risks

  Front-loading purchases may exaggerate order strength, while slower sales conversion and higher input costs may pressure profits.

• Consumer and Retail

  Marginal positive contributor

  Strengths

  Puma and Adidas reported earnings above expectations, with share prices rising 5% and 8% on the announcement day, respectively; Ahold Delhaize's U.S. margins and Zalando's adjusted EBIT were better than expected.

  Weaknesses

  Middle East sales declined due to the Iran conflict, and the consumer sector's contribution remains marginal rather than broad-based.

  Comparison

  Consumer companies provide some positive support outside financials and commodity-related sectors.

  Risks

  Regional sales pressure, exchange rates, and changes in consumer demand may affect future performance.

• GSSTCAPI

  Capital-intensive thematic basket

  Strengths

  2026 earnings have been revised up by about 3% over the past month, and the performance chart shows about +3.1%, making it one of the leading themes.

  Weaknesses

  Highly dependent on the capex cycle, financing costs, and project execution.

  Comparison

  Outperforms STOXX 600 by about +1.3% and STOXX 600 ex commodities by about +0.4%.

  Risks

  If themes around real rates, fiscal policy, or supply-chain restructuring cool, earnings revisions could ease.

Key data

• Reported companiesMore than 280 companiesRepresents about 75% of the total market cap still to be disclosed in the 1Q26 earnings season.
• SXXP equal-weight reporting progress285/375 companies, 76.0%From Exhibit 6's STOXX Europe 600 equal-weight earnings surprise statistics.
• SXXP equal-weight average earnings surprise+1.7%Excluding financials, +1.3%.
• Market-cap-weighted EPS surpriseAbout +2.3%Slightly below the historical average.
• Earnings miss announcement-day reactionUnderperformed the market by about 1.5% on averageCompanies that beat expectations outperformed by less than 1% on average on the announcement day.
• SXXP absolute earnings surprise splitPositive 63.5%, negative 36.5%Excluding financials, positive 61.4% and negative 38.6%.
• EU big oil operating cash flow9% above expectationsOffset higher-than-expected capex and supported solid free cash flow delivery.
• Capital goods order upside share77%Among Goldman Sachs' covered capital goods companies, order momentum is mainly driven by AI and data center demand.
• Capital goods sales conversion pressureAbout 70% missed expectationsThe cycle from orders to sales appears to be lengthening.
• Capital goods margin pressureAbout 50% missed expectationsPrimarily due to input costs.
• Overall EPS revision since the Iran warAbout +4%Driven mainly by commodity-related sectors such as energy and basic resources.
• GSSTCAPI earnings revision2026 earnings revised up by about 3% over the past monthSupported by higher real rates, more active fiscal policy, reshoring, supply-chain restructuring, and geopolitics.

Impact & implications

For investors, short-term earnings resilience in European equities remains intact, but it depends more on sector structure than on broad-based improvement. Financials, energy, basic resources, chemicals, and some consumer companies are providing positive support; capital-intensive themes are backed by medium-term structural factors. However, the market continues to punish negative surprises more than it rewards positive ones, suggesting that earnings beats alone are not enough to drive a meaningful valuation rerating. Earnings quality, sales conversion, cost pressure, and guidance credibility will matter more.

Risks

• Rising macro uncertainty may reduce the reliability of consensus expectations and company guidance.
• Companies that miss earnings expectations continue to face more pronounced announcement-day share-price penalties.
• Capital goods orders may be inflated by front-loaded purchasing, and the sales conversion cycle is getting longer.
• Rising input costs are compressing margins for some companies.
• Commodity-related sectors are contributing materially to the overall EPS revision; if momentum in energy, basic resources, or chemicals reverses, overall earnings resilience may weaken.
• Geopolitical events such as the Iran conflict may affect Middle East sales, energy prices, and cross-asset performance.

What to watch

• Whether the earnings surprises from the remaining roughly 25% of market cap still to be reported continue to show a positive trend.
• Whether 2026 company guidance continues to diverge from consensus with only weak share-price reactions.
• Whether EPS revisions in energy, basic resources, and chemicals can persist.
• Whether capital goods orders can translate into sales and whether margin pressure eases.
• Whether financials continue to support SXXP's overall earnings surprise to the same extent.
• Whether the positive readings from consumer and retail names such as Puma, Adidas, Ahold Delhaize, and Zalando spread to the broader consumer sector.
• Whether the relative outperformance of GSSTCAPI, GSSTDIVG, and GSSTSBAL versus STOXX 600 is sustained.