Europe 1Q26 earnings season nearing the end: earnings beats remain positive, but concentrated

Overview

This report is Goldman Sachs' update near the end of Europe’s 1Q26 earnings season. It covers the STOXX Europe 600 and multiple European sectors, thematic baskets, and indices, focusing on earnings and sales beats, guidance deviations, earnings revisions, sector performance, valuation, flows, and macro assumptions. The core conclusion is that positive earnings surprises in Europe remain intact, but the contribution is concentrated in Financials, Energy, Basic Resources, Chemicals, and some consumer companies; in the current market environment, investors are clearly punishing misses, while the reward for beats and raised guidance is relatively limited.

Core views

First, the earnings season is broadly advanced, with more than 280 companies having reported, representing about 75% of the market cap due to report. Second, cap-weighted EPS is beating by about 2.3%, and the equal-weight average beat is about 1.7%, still positive but not broad-based. Third, Financials, Commodities, Energy, Basic Resources, and Chemicals are contributing the most to earnings surprises and revisions, while Consumer also adds marginal support through names such as Puma, Adidas, Ahold Delhaize, and Zalando. Fourth, capital goods orders are supported by demand from AI and data centers, but investors are worried that early procurement may have inflated order strength; the conversion to sales and margin pressure still need to be watched. Fifth, the market reaction to guidance deviations versus consensus is weaker than in the past, possibly reflecting rising macro uncertainty and lower trust in forward estimates.

Analysis framework

The report uses a bottom-up earnings tracking approach, comparing reported companies’ EPS, sales, guidance, and share-price reactions against market consensus, while also using equal-weight and cap-weighted measures to observe contributions at the sector and index level. It further combines earnings revisions by industry, thematic basket performance, valuation percentiles, flows, and macro forecasts to assess the sources of earnings momentum and relative performance in European equities.

Methodology notes

• earnings_trackingEPS surprise tracking

  earnings beat tracking

  Compares reported EPS with market consensus and aggregates results using both equal-weight and cap-weighted methods to distinguish breadth from the contribution of large-cap companies.

• market_reactionrelative price reaction

  relative share-price reaction on report date

  Compares a company’s report-date performance relative to the market after earnings or guidance come in above or below consensus, to measure the asymmetry in how the market rewards positive versus negative surprises.

• guidance_analysisconsensus midpoint comparison

  guidance midpoint versus consensus comparison

  When a company provides a range guidance, the report uses the midpoint of the range versus market consensus to judge whether guidance is above or below expectations.

• style_theme_analysisGS thematic baskets

  thematic baskets and style performance

  The report tracks the relative performance of thematic or style baskets such as capital-intensive, strong balance sheet, dividend growth, and weak balance sheet, to identify market mappings of earnings revisions and macro themes.

Asset mapping & comparison

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

• STOXX Europe 600 / SXXP

  Broad European equity index and the report’s core tracking object

  Strengths

  Reported companies overall still show positive EPS surprises, about +2.3% on a cap-weighted basis and about +1.7% on an equal-weight basis.

  Weaknesses

  The beat is highly concentrated; excluding Financials, cap-weighted EPS surprise falls to about +1.0%.

  Comparison

  Versus the historical average, the latest earnings surprise is positive but slightly weaker; versus commodities-related and Financials sectors, non-financial and non-commodities momentum is weaker.

  Risks

  Macro uncertainty, lower guidance reliability, and amplified punishment for negative surprises.

• Financials

  One of the main contributors to earnings beats

  Strengths

  Financials continue to drive the overall positive earnings surprise, and Banks perform strongly on both equal-weight and cap-weighted bases.

  Weaknesses

  The contribution to the overall index is concentrated and may obscure insufficient breadth in other industries.

  Comparison

  SXXP EPS surprise excluding Financials is below the overall figure, showing that Financials are relatively ahead.

  Risks

  The interest-rate path, credit quality, and regulatory changes may affect future earnings.

• Energy and Basic Resources

  Core source of commodities-related earnings revisions and relative performance

  Strengths

  Energy and Basic Resources have led roughly 4% cumulative EPS revisions since the Iran war, and Energy’s relative performance is strong.

  Weaknesses

  Highly sensitive to oil, gas, metals, and geopolitical events; earnings durability depends on the commodity price environment.

  Comparison

  Performance is stronger than Consumer, Industrials, and Travel & Leisure sectors.

  Risks

  A decline in commodity prices, easing of geopolitical tensions, capex overshoot, or free-cash-flow pressure.

• Capital Goods / GSSTCAPI

  A theme linked to capex and AI/data-center demand

  Strengths

  Capital Goods orders are strong, with 77% of covered companies beating order expectations; GSSTCAPI 2026 earnings were revised up 3% over the past month.

  Weaknesses

  About 70% miss sales expectations, with a longer order-to-sales conversion cycle; about 50% miss margin expectations, indicating cost pressure.

  Comparison

  The capital-intensive theme is performing better than capital-light themes and the weak balance sheet basket.

  Risks

  Early procurement may have overstated order strength, cost pressure may persist, and orders may not convert smoothly into revenue.

• Consumer companies

  A group that makes a marginal contribution to earnings beats

  Strengths

  Puma and Adidas reported better-than-expected results, with share prices rising about 5% and 8% on the report date; Ahold Delhaize’s US margin and Zalando’s adjusted EBIT were also better than expected.

  Weaknesses

  Middle East sales were less affected by the Iran conflict, and the Consumer sector’s contribution is more local than broad-based.

  Comparison

  Relative to Energy and Financials, Consumer contributes less to the overall earnings surprise but is improving at the margin.

  Risks

  Regional demand volatility, geopolitical impacts on sales, retail margin pressure, and changes in consumer confidence.

• Autos & Parts, Travel & Leisure, Real Estate, Media

  Relatively pressured sectors

  Strengths

  Some sectors may offer selective opportunities through valuation or cyclical rebound, but the evidence in the report is limited.

  Weaknesses

  Charts and tables show these sectors are weak in earnings surprise or relative performance; Media, Real Estate, Construction and Materials, Autos & Parts, and similar groups have negative average surprises.

  Comparison

  Clearly lagging Energy, Basic Resources, Chemicals, and Financials.

  Risks

  Weak demand, cost pressure, financing conditions, valuation compression, and macro uncertainty.

Key data

• Earnings reporting coverageMore than 280 companies; about 75% of total market cap due to reportAs of the report date, the main body of the 1Q26 earnings season is over.
• STOXX Europe 600 equal-weight reporting progress285/375 companies, 76.0%In the equal-weight sample, the average EPS beat is about 1.7%.
• STOXX Europe 600 cap-weighted reporting progress50/68 companies, 73.0%In the cap-weighted sample, the average EPS beat is about 2.3%.
• Absolute EPS beat ratio63.5% positive, 36.5% negative on an equal-weight basisThis shows that earnings surprises remain tilted positive, but not broadly distributed.
• Cap-weighted EPS beat excluding Financials+1.0%Lower than the overall cap-weighted +2.3%, indicating that Financials are a major contributor to the aggregate beat.
• Share-price reaction to missesUnderperformed the market by about 1.5% on average on the report dateNegative surprises continue to be clearly punished.
• Share-price reaction to beatsOutperformed the market by less than 1% on average on the report dateThe market reward for positive surprises is relatively modest.
• 2026 guidance disclosureAbout 140 of roughly 450 SXXP companies have provided at least one key financial guidance itemAbout half of the guidance is below analyst expectations, but the report-date performance is broadly in line with the market.
• Cumulative EPS revisions since the Iran warAbout +4%Mainly driven by commodities-related industries such as Energy and Basic Resources.
• Chemicals earnings revisions+3%Above the market’s roughly +1.5%; the report believes chemicals companies can pass higher costs downstream.
• GSSTCAPI 2026 earnings revisions+3% over the past monthCapital-intensive stocks are supported by real rates, fiscal policy, reshoring, supply-chain restructuring, and geopolitics.
• Energy relative performanceOne of the strongest positive sectors both in the 1Q26 earnings season and since the Iran warThe chart shows Energy significantly ahead, though some figures are based on visual estimates.

Impact & implications

For investors, European equities still have earnings support, but selectivity has risen sharply. Commodities-related, Financials, Chemicals, Energy, and capital-intensive themes are more likely to benefit from earnings revisions and macro repricing; meanwhile Autos, Travel & Leisure, Real Estate, Media, and parts of the industrial chain are under earnings or share-price pressure. Because the market is more sensitive to negative surprises and less generous toward positive surprises, portfolio management should place greater emphasis on downside risk, margin pressure, and guidance credibility rather than relying only on headline beats.

Risks

• Earnings beats are concentrated in a few sectors, leaving overall market earnings breadth insufficient.
• Negative earnings surprises are punished more severely by the market, with average underperformance of about 1.5% on the report date.
• Higher macro uncertainty is reducing the market’s confidence in company guidance and consensus estimates.
• Capital goods orders may be overstated due to early procurement, and sales conversion may slow.
• Rising input costs compress margins, and about 50% of capital goods companies miss margin expectations.
• Earnings revisions in Energy and Basic Resources depend on commodity prices and geopolitical conditions, making them volatile.

What to watch

• Whether the EPS and sales beat breadth among remaining unreported companies improves.
• Whether earnings revisions in Financials and commodities-related sectors can extend into full-year 2026 expectations.
• Whether Capital Goods orders convert into sales, and whether margin pressure eases.
• The degree to which 2026 company guidance deviates from consensus, and whether the market continues to discount guidance reactions.
• The subsequent performance of consumer companies in Middle East sales, US margins, and European demand.
• Whether Energy, Basic Resources, Chemicals, and capital-intensive themes continue to lead relative performance.
• Whether weak sectors such as Autos & Parts, Travel & Leisure, Real Estate, and Media show signs of earnings repair.