Europe's Q1 2026 earnings season kicks off, with earnings growth mainly driven by Financials and Energy

Overview

This report looks ahead to the European Q1 2026 earnings season. Goldman Sachs notes that earnings season will begin next week, and by the end of May around 380 covered companies will have reported results, accounting for roughly 70% of STOXX 600 market cap. Current market expectations still point to positive earnings growth in the quarter, but growth is highly concentrated in Financials and Energy; outside commodity-related industries, margin pressure and slower macro growth make earnings revisions more fragile.

Core views

The core view is: first, the energy shock has lifted margins and earnings expectations for commodity-linked companies, but it is eroding margins in sectors outside Energy and Basic Resources. Second, STOXX 600 2026 earnings expectations have been revised up 2% year to date, but almost all of that comes from Energy and Basic Resources; excluding financial and commodity-related stocks, earnings expectations are down 2%. Third, Goldman Sachs believes the market consensus for 13% 2026 earnings growth is too high and may converge toward its 5% estimate as earnings season progresses. Fourth, upside risk still needs to be watched, similar to what happened during the 2022 energy price shock, when STOXX Europe EPS rose by about 20%, supported by Energy, Utilities, and a strong U.S. dollar.

Analysis framework

The report uses STOXX 600 and European sectors as the core sample, combining earnings expectations, margin revisions, EPS year-over-year growth, sector contributions, PMI activity indicators, euro area GDP forecasts, sales geography exposure, and cross-asset performance to assess earnings-season risk. The focus is not on single-company fundamentals, but on the direction of earnings revisions at the sector and index level.

Methodology notes

• Earnings revision analysisConsensus earnings expectations and margin decomposition

  Decompose EPS expectation changes into sector contributions and margin changes

  The report compares changes in 2026 earnings expectations for STOXX 600 and its sectors, noting that the overall market upgrade is mainly driven by Energy and Basic Resources, while the downgrade outside commodity sectors is almost entirely due to weaker margin expectations.

• Macro-to-earnings mappingPMI and GDP growth as guides to earnings revisions

  Use the strength or weakness of macro activity to assess whether earnings expectations need to be revised down

  Goldman Sachs links euro area GDP growth expectations and PMI activity levels to SXXP earnings revisions, arguing that current activity levels suggest earnings revisions may weaken.

• Scenario comparison2022 energy shock precedent

  Assess upside risk using a historical energy price shock

  The report reviews the roughly 20% rise in STOXX Europe EPS after the 2022 energy price surge, highlighting that even if Goldman Sachs is below consensus, Energy, Utilities, and a strong U.S. dollar could still drive earnings upside risk.

Asset mapping & comparison

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

• STOXX 600 / SXXP

  The European large-cap equity index and the report's main analytical focus

  Strengths

  At the index level, 1Q26 EPS is still expected to grow, and companies with high market-cap coverage will report heavily during earnings season.

  Weaknesses

  Earnings growth is concentrated in a few sectors; excluding Banks and Energy, 1Q26 EPS is expected to decline 2%.

  Comparison

  Compared with the broader STOXX 600, earnings revisions excluding financial and commodity-related stocks are weaker.

  Risks

  The 13% consensus 2026 earnings growth may be too high and could be revised down toward Goldman Sachs' 5% estimate.

• Financials / Banks

  Positive earnings contribution sector

  Strengths

  Banks' 1Q26 EPS is expected to grow 6%, and Financials is one of the few non-commodity areas still seeing earnings upgrades.

  Weaknesses

  The report does not single out any bank or financial company; sector contribution may mask stock-level dispersion.

  Comparison

  Compared with non-financial, non-commodity sectors, Financials shows stronger earnings resilience.

  Risks

  If macro growth continues to slow or market volatility rises, Financials earnings expectations could still be revised.

• Energy

  Positive earnings contributor and beneficiary of the energy shock

  Strengths

  1Q26 EPS is expected to grow 17%, and 2026 earnings expectations are up 38% year to date.

  Weaknesses

  Earnings support depends heavily on energy prices, geopolitics, and the cost-pass-through environment.

  Comparison

  Energy is one of the most important sources of STOXX 600 earnings upgrades.

  Risks

  Energy price volatility, geopolitical shifts, and slowing demand could reverse earnings expectations.

• Basic Resources

  Commodity-linked earnings upgrade sector

  Strengths

  2026 earnings expectations are up 11% year to date, supported by energy and commodity price conditions.

  Weaknesses

  The sector is highly cyclical and sensitive to global demand and commodity prices.

  Comparison

  Together with Energy, it explains almost all of the STOXX 600 2026 earnings expectation upgrade.

  Risks

  If commodity prices fall or demand in Asia and emerging markets is hit, earnings expectations may be revised down.

• Non-commodity, non-financial STOXX 600 companies

  Area where earnings pressure is concentrated

  Strengths

  Some Hardware & IT Equipment names are still cited as among the few areas with upgrades.

  Weaknesses

  Excluding financial and commodity-related stocks, STOXX 600 earnings expectations are down 2% year to date and margins are being eroded.

  Comparison

  Significantly weaker than the overall index and than Energy, Basic Resources, and Financials.

  Risks

  Rising input costs, supply-chain disruptions, and slower demand may continue to compress margins.

• European companies exposed to Asia and EM

  Stock group affected by regional sales and supply chains

  Strengths

  About 30% of SXXP sales come from CEEMEA and APAC, which can support revenue if regional demand remains stable.

  Weaknesses

  A near closure of the Strait of Hormuz would pressure Asian and emerging-market economies and supply chains.

  Comparison

  More sensitive to external supply chains and regional macro shocks than companies with higher domestic revenue exposure.

  Risks

  Supply-chain disruptions, weaker regional demand, and higher transport costs could affect earnings.

• Software and Data Services

  Potentially affected sector in the AI usage and cost-cutting debate

  Strengths

  Management teams are discussing how AI adoption can improve efficiency and lower costs.

  Weaknesses

  The report warns that AI-related cost cutting may have a negative impact on the software and data services industry.

  Comparison

  Unlike sectors that directly benefit from energy prices, this segment faces more risk from customer cost-cutting and technology substitution.

  Risks

  If companies reduce external software and data services spending through AI, related revenue growth could come under pressure.

Key data

• Reporting coverageAbout 380 companies; roughly 70% of STOXX 600 market capExpected to be reported by the end of May 2026.
• 1Q26 STOXX 600 EPS growth expectation4%For roughly 50% of STOXX 600 companies that report quarterly results.
• Banks EPS growth expectation6%Financials are one of the main sources of positive growth.
• Energy EPS growth expectation17%Supported by energy prices and margins.
• 1Q26 EPS excluding Banks and Energy-2%Shows that earnings growth is not broad-based.
• STOXX 600 2026 earnings expectation revision YTD+2%Almost entirely from commodity-related sectors.
• Energy 2026 earnings expectation revision+38%Expectations have been materially upgraded against the backdrop of rising energy costs.
• Basic Resources 2026 earnings expectation revision+11%Also supported by commodity-related factors.
• STOXX 600 earnings revision excluding financial and commodity-related stocks-2%Reflects broader market earnings pressure.
• 2026 consensus earnings growth versus Goldman Sachs estimateConsensus 13%; Goldman Sachs 5%Goldman Sachs expects consensus to move toward its lower estimate.
• Euro area Q4 GDP growth forecast0.7% y/yBelow the pre-war 1.4% forecast and also below consensus.
• SXXP sales from CEEMEA and APACAbout 30%This leaves European companies exposed to supply-chain and demand shocks from Asia and emerging markets.

Impact & implications

For investors, the key question in Europe’s Q1 earnings season is not whether headline EPS is positive, but whether earnings growth can broaden beyond Energy, Basic Resources, and Financials. If the energy shock continues to pass through the value chain, downstream companies such as low-end price-taking Consumer Discretionary names may face greater cost and margin pressure; if energy and dollar support persists, index-level earnings could still retain an upside cushion.

Risks

• The energy shock continues to pass through downstream value chains, compressing margins in non-commodity sectors.
• A near closure of the Strait of Hormuz affects Asian and emerging-market economies and supply chains, thereby impacting SXXP companies with about 30% of sales from CEEMEA and APAC.
• The market consensus for 13% 2026 earnings growth may be too optimistic, creating downside revision risk as earnings season progresses.
• Lower-end price-taking Consumer Discretionary companies may find it harder to pass input-cost increases through to end customers.
• AI-driven cost cutting could put revenue pressure on industries such as Software and Data Services.
• Geopolitical tension and sharp energy-price volatility may amplify uncertainty around earnings expectations.

What to watch

• Watch for management comments on margins, input costs, and supply-chain disruptions.
• Watch whether the energy shock continues to move from upstream into downstream consumer and industrial segments.
• Watch whether sectors outside Financials, Energy, and Basic Resources begin to show broader earnings downgrades.
• Watch European companies' sales exposure to CEEMEA and APAC and any changes in regional demand.
• Watch management commentary on AI usage, cost cutting, and spending on software and data services.
• Watch whether PMI readings and euro area GDP growth forecasts continue to point to slower earnings revisions.