The fourth quarter 2025 earnings season officially begins this week, and the stakes couldn't be higher. After two consecutive years of double-digit gains for the S&P 500, corporate America must now prove it can deliver the profits needed to justify what many analysts consider stretched valuations.
Wall Street's consensus is cautiously optimistic: analysts expect S&P 500 earnings per share to grow 8.3% year-over-year in Q4, which would mark the tenth consecutive quarter of earnings growth. Revenue is projected to rise 7.6%, continuing an impressive 21-quarter streak that represents the second-strongest growth since Q3 2022.
The Week Ahead
The earnings marathon kicks off in earnest on Monday with JPMorgan Chase, the nation's largest bank by assets, setting the tone for the financial sector and the broader market. The rest of the week brings a parade of financial heavyweights:
- Monday, January 13: JPMorgan Chase (before market open)
- Tuesday, January 14: Bank of America, Citigroup, Wells Fargo
- Wednesday, January 15: Goldman Sachs, Morgan Stanley
Bank earnings will offer critical insights into consumer spending, credit quality, and the health of the deal-making environment. With M&A volume surging 42% in 2025 to $5.1 trillion globally, investment banking divisions at Goldman Sachs and Morgan Stanley are expected to post strong results.
A Rare Positive Revision Cycle
One encouraging sign for bulls: analysts have actually increased their earnings estimates during the quarter. On a per-share basis, estimated earnings for Q4 rose 0.5% from September 30 to December 31. While that may sound modest, it's significant because analysts typically lower estimates as the quarter progresses.
Over the past five years, earnings expectations have fallen by an average of 1.6% during each quarter. The fact that estimates rose instead suggests corporate confidence is holding firm despite macroeconomic uncertainties.
"The number of companies issuing positive EPS guidance is above the five-year average. The percentage of S&P 500 companies issuing positive guidance stands at 47%—above the historical norm of 42%."
— FactSet Earnings Insight
Sector Spotlight: Tech Leads the Charge
The Information Technology sector remains the standout performer, with analysts projecting EPS growth of 25.7% and revenue growth of 17.9%. The semiconductor subsector is driving much of this outperformance, as companies like Nvidia, AMD, and Micron continue to benefit from insatiable demand for AI computing infrastructure.
Other sectors expected to post solid growth include:
- Communication Services: Benefiting from digital advertising recovery and streaming profitability
- Financials: Strong capital markets activity and improving credit conditions
- Healthcare: Pharmaceutical pricing power and biotech M&A activity
On the other end of the spectrum, the Energy sector faces headwinds from declining oil prices, while Materials companies grapple with sluggish global industrial demand.
The Valuation Elephant in the Room
The challenge for investors isn't whether earnings will grow—it's whether they'll grow enough to justify current prices. The S&P 500's forward price-to-earnings ratio has climbed to levels that make some market veterans uncomfortable.
With the benchmark index trading near all-time highs, any disappointment in earnings or forward guidance could trigger meaningful pullbacks. Goldman Sachs analysts have warned of a potential "volatility gap" as earnings season unfolds, noting that options markets aren't pricing in enough potential movement around key reports.
The math is straightforward: if companies deliver 8.3% earnings growth but the market expects 10%, stocks will likely fall. The bar for positive surprises has been set high.
What Banks Will Reveal About the Economy
Beyond the headline numbers, bank earnings will provide crucial real-time data about economic conditions:
Consumer Health
Credit card delinquencies, loan loss provisions, and consumer spending patterns will offer insights into whether households are holding up under the weight of elevated interest rates. Recent data showing credit card delinquencies near decade highs suggests some stress in the system.
Interest Rate Sensitivity
With the Fed Funds rate currently at 3.50%-3.75% after a series of late-2025 cuts, banks must navigate a complex interest rate environment. Net interest margins—the spread between what banks earn on loans and pay on deposits—will be closely watched.
Deal Pipeline
Commentary on M&A pipelines and IPO activity will signal whether the dealmaking recovery has legs. After years of subdued activity, 2025's surge to $5.1 trillion in global M&A has raised hopes for a sustained recovery in corporate transactions.
Looking Beyond Q4
Perhaps more important than Q4 results themselves will be forward guidance. Analysts are currently projecting earnings growth of 12.6% for Q1 2026 and 14.6% for Q2 2026. For the full year 2026, the consensus calls for 14.9% earnings growth.
These are ambitious targets that assume continued economic expansion, stable consumer spending, and ongoing AI-driven technology investments. Any significant downward revisions to guidance could ripple through stock prices.
How to Position
For investors, earnings season presents both risks and opportunities. Those with concentrated positions in companies reporting early in the cycle may want to consider trimming ahead of announcements. Diversified investors can use the volatility to add to high-conviction names that may dip on sector-wide selling.
The bottom line: Q4 2025 earnings season will test whether Corporate America can deliver the goods. With ten quarters of growth on the line and valuations stretched, there's no room for disappointment. The market's next move may well be decided in the conference calls ahead.
