Headlines
Europe Q2 earnings: Strong euro, tariff worries weigh but banks shine
Published by Global Banking & Finance Review®
Posted on August 11, 2025
4 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on August 11, 2025
4 min readLast updated: January 22, 2026
European banks excel in Q2 earnings despite tariff concerns and a strong euro, with financials leading growth.
By Samuel Indyk and Danilo Masoni
LONDON/MILAN (Reuters) -European companies are proving they can just about endure U.S. import tariffs, eking out earnings growth for a fifth straight quarter, but at a slower pace than in the United States.
According to LSEG I/B/E/S, second-quarter earnings are expected to have increased 3.1% from the same period a year ago. Just over half of the companies to have reported have exceeded analyst estimates, broadly in line with a typical quarter.
Earnings from financials (up 11.4%) and healthcare (up 15.4%) are among the strongest growth rates but while the former is loved by investors, the latter is currently out of favour.
Here are five lessons from Q2 earnings:
EARNINGS SLUGGISH, OUTLOOK POSITIVE
European companies remain optimistic even though their Q2 earnings growth is substantially weaker than the big tech-powered 12% expected in the United States.
"Roughly 30% of companies have increased their guidance and very few companies downgraded guidance, which is surprisingly positive," Maximilian Uleer, Deutsche Bank's head of European equity and cross asset strategy research, said.
"We think this guidance observation is pretty important and the theme will continue as companies have better visibility on the downside risk," Uleer added, citing the recent trade deal between the U.S. and European Union.
EURO PAIN
Currency strategists bet that the dollar would strengthen, particularly against the euro, when the higher U.S. import tariffs kicked in.
But the single currency has risen over 12% against the greenback this year and Europe's export-heavy companies have felt the pain.
"Larger companies are typically more globally diversified, they generate more revenues from outside of Europe and obviously with the euro strength, that's been a relative headwind for earnings for them," said Rory Dowie, portfolio manager at Marlborough.
Barclays and Citi estimate that, typically, a 10% appreciation in the euro results in around a 2% earnings headwind, with Citi pointing to sectors like materials and energy as the most sensitive to FX moves.
Yet a broad spectrum of companies have flagged currency headwinds, including Allianz, Bayer, Continental, Ferrari, TotalEnergies and Puma, according to analysis of transcripts.
UNSTOPPABLE BANKS?
All seven lenders in the STOXX 50 blue-chip index beat expectations, and two improved their guidance. The sector index surged to its highest since 2008, as investors bet on the industry's resilience.
Financials delivered the biggest positive second-quarter earnings surprise among European sectors, coming in 12% above analyst forecasts, more than twice the 5.5% rate for the broader STOXX 600, according to LSEG I/B/E/S data.
"In Europe, banks have been the main driver of this season, whereas in other areas like autos and discretionary goods we're seeing sharp downward revisions," said Alberto Tocchio, Head of Global Equity and Thematics at Kairos Partners.
Still, after a 37% rally this year and the best three-year run since the euro's launch in 1999, some caution is creeping in. BofA has advised long-term investors to hedge exposure, warning that banks could be vulnerable if the economy slows.
HEALTHCARE ON WATCH
The European healthcare sector has posted Q2 earnings growth of 15%, second only to the technology sector, but investors are keeping their powder dry given U.S. President Donald Trump has mooted a 250% levy on pharmaceutical imports.
"We are very cautious on the sector despite the earnings growth," said Deutsche Bank's Uleer. "If we have certainty at some point, it's one where I could think of doing a double upgrade from underweight to overweight."
CONSUMER PAIN
Investors are turning away from consumer stocks as weak results and cautious outlooks highlight the sector's vulnerability to tariffs and shifting spending habits.
Companies from luxury to staples are struggling to balance cost pressure with fragile demand, especially in the U.S. - forcing tough decisions on pricing and strategy.
"Anyone exposed to consumption, especially services, is really being hit," said Arun Sai, senior multi-asset strategist at Pictet, noting that the market has underappreciated how much the U.S. has already slowed.
According to LSEG I/B/E/S data, earnings from consumer cyclicals such as carmakers and luxury have come in 8% below expectations, while the rate for consumer non-cyclicals such as food companies is 2%, less than half the broader market.
Adidas shares fell 18% over six days after it warned it may have to hike U.S. prices, while brewer AB InBev fell 11% as weak Brazil and China demand hit volumes.
In the luxury sector, Ferrari slumped 12% in its biggest drop ever after saying it would cut U.S. prices, while Hermes shares dropped 12% over three days.
(Reporting by Samuel Indyk and Danilo Masoni; Editing by Kirsten Donovan)
Earnings growth refers to the increase in a company's profits over a specific period, typically compared year-over-year. It indicates the company's ability to generate more income.
Currency appreciation occurs when a currency increases in value relative to others. This can affect export competitiveness and earnings for companies with significant foreign revenues.
Corporate profit is the net income that a company earns after all expenses, taxes, and costs have been deducted from its total revenue.
Economic growth is the increase in the production of goods and services in an economy over a period, typically measured by GDP growth.
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