US 2Q25 earnings wrap: AI drives S&P 500 to new peaks

Published on September 18, 2025 by Rakesh Kumar and Julie Koshy Sam

The S&P 500 (SPX) marched ahead in the 2Q earnings season and surged 10.79% year-to-date (YTD) as of end-August. 2Q marked a third consecutive quarter of double-digit earnings growth. The impressive rally withstood a mid-quarter broad sell-off, fuelled by President Donald Trump’s fresh tariff announcements, and challenges posed by geopolitical tensions and an evolving economic scenario, among others.

As 2Q concluded, all the S&P companies reported their financial results. According to FactSet, 81% S&P 500 companies posted higher earnings per share (EPS) and 69% reported higher revenue than Street estimates. Eight of the 11 S&P sectors posted y/y earnings growth in the quarter, crossing the 10-year average for both metrics. Even though the earnings surprises were slightly below the recent highs, the overall positive results underscored a robust corporate sector.

The Communications sector emerged as the clear leader in 2Q earnings, reporting attractive growth (44.07%). Alphabet and Meta Platforms were among the biggest contributors to this growth thanks to the robust demand for their artificial intelligence (AI)-related products and services. Netflix reported revenue of $11.08bn – a 16% y/y increase. During the quarter, the streaming giant released a strong content slate (popular series such as Squid Games), as well as saw ad-tier growth and price revisions, which boosted revenue. Meanwhile, Uber’s revenue jumped $12.7bn – up 18% y/y – riding on its core businesses such as ride-hailing and food delivery.

The Information Technology sector led the leaderboard in revenue growth (+15.3%) and was the runner-up in earnings growth (+22%). Nvidia and Microsoft continued to post substantial gains in the current landscape, highlighting their critical roles, while Tesla had an underwhelming quarter.

On the downside, the Energy, Consumer Staples and Materials sectors experienced y/y declines in earnings. The Energy sector was the biggest laggard, dragged down by a material xx% y/y drop in crude oil prices, which pared its 2Q earnings by 19% y/y. A host of reasons (e.g., weak consumer sentiment and impact of new tariffs, brewing economic uncertainty) contributed to Consumer Staples’ anaemic performance. The Materials sector also faced a tough environment, reporting negative earnings growth, tracking analyst expectations. Dow Inc. was the largest drag on the overall sector decline. Primary challenges stemmed from macroeconomic factors including the ongoing global trade landscape. The implementation of new taxes on goods made it difficult for companies to plan and manage costs, ultimately impacting revenue and profit margins across the sector.

In the latest US Fed policy meeting held on 17 September 2025, the US Federal Reserve has slashed interest rate by 25 basis points—for the first time since December 2024—in an effort to improve the labour market. With this rate cut, the Federal Reserve brought down its key interest rate to a 4% to 4.25% range. The US Federal policymakers have also hinted two more rate cuts through the end of the year. Investors will now look for inflation reports such as Consumer Price Index to gauge future Fed policy.

Sectoral highlights

Information Technology: Exceptional earnings as AI fuels index gains

The Tech sector, led by the ‘Magnificent 7’ (Mag 7), struck gold. The sector boasted the highest number of companies (93%) with positive earnings surprise. The Mag 7 group’s combined net profit came in at $145bn, up 20% y/y. Unsurprisingly, the sector’s growth was driven by AI, apart from hardware and software. Tariffs-led geopolitical risks could be a concern for the sector as AI helps gain the lead in earnings growth. The S&P500 Technology Index has produced stellar returns of over 14% YTD.

Nvidia: Nvidia – the stock market’s AI darling – came back strongly in the quarter, aided by demand for its AI chips. The company announced record quarterly revenue of $46.7bn – a 56% y/y increase. However, revenue from the data centre segment – a key growth driver – disappointed for a second straight quarter. In the earnings call, management hinted at future risks to shipments of H20 chips to China such as potential supply chain disruptions, macroeconomic headwinds and regulatory changes.

Microsoft: Tech giant Microsoft became the first company to exceed a market valuation of $4trn after Nvidia. Total revenue edged up 18% y/y to $76.4bn. The productivity and business processes segment, which include Microsoft 365 and LinkedIn, contributed $13.5bn to revenue. Microsoft is looking to invest in data centres and AI infrastructure, evident in its capital expenditure and commitment to tap AI-driven offerings.

Apple: Apple posted a robust fiscal, with quarterly revenue of $94bn, up 9.6% y/y. The Services segment proved to be a cash cow, posting record revenue growth (in double digits). The wearables, home and accessories segment’s revenue decreased 9%. Amid President Trump’s call for tariff hikes, CEO Tim Cook expects a $900m hit from tariff-related costs. With AI being the buzzword, the company highlighted its ongoing experiments with ‘Apple Intelligence’ and its integration within its ecosystem.

Key monitorables

• AI-focused returns: Investments in AI infrastructure for revenue and profit growth

• Regulatory headwinds: Increased government scrutiny and potential anti-trust regulations

Communications: Advertising spending fuels earnings surprise

The Communications sector led the charge in US 2Q25 results, driven by optimism around AI and potential interest rate cuts. No wonder that the S&P 500 Communication Services Index has advanced c.18% YTD as of end-August – the highest among all the sectors. Companies, such as Alphabet and Meta Platforms, were the top performers in the quarter.

Alphabet: Tech giant Alphabet's 2Q revenue grew 14% y/y to $96.4bn, powered by its cloud computing and AI operations. The company has earmarked $85bn for AI infrastructure – building data and acquiring servers to meet AI demand.

Meta Platforms: It saw a 22% y/y increase in revenue to $47.5bn, exceeding analyst forecasts. Ad revenue grew 21%, with AI-driven tools improving ad conversions by c.5% on Instagram and 3% on Facebook. Despite the tech giant’s heavy investments in AI infrastructure and Reality Labs, solid ad revenue provided funds for its AI and metaverse ambitions.

Warner Bros: Discovery reported revenue of $9.81bn on blockbuster hits and international roll-out of HBO Max.

Key monitorables

• AI’s impact on ad revenue

• Streaming service profitably: Expect price hikes and wider roll-out of ad-supported tiers

Financial: Resilience notwithstanding macroeconomic uncertainty 

The sector displayed resilience in 2Q25, as banks and financial institutions posted stronger-than-expected earnings, despite ongoing macroeconomic uncertainty. Investment-grade and high-yield bond returns remained in positive territory, outperforming cash yields. The sector benefited from improved market sentiment and continuing strategic investments, particularly in AI. The S&P 500 Financials Index is up about 13% YTD.

JPMorgan: 2Q earnings topped Street , supported by better-than-expected revenue. The bank's trading desk benefited from market volatility while increased demand for debt underwriting and advisory services from corporate clients bolstered investment banking (IB) revenue. Despite a decline in net interest income (), management raised 2025 guidance to $95.5bn.

Goldman Sachs: The company reported strong 2Q results, supported by a rebound in IB activity and record-high equities and fixed income, currency and commodities (FICC) revenue. Assets under supervision peaked, indicating client optimism and strong inflows. The $1 per share sequential increase indicates management’s confidence in the company’s future performance.

Wells Fargo: Its decent performance in 2Q25 was the outcome of continued progress in profitability and efficiency despite a challenging interest-rate environment. Robust consumer lending activity drove the Consumer Banking and Lending segment (the largest revenue contributor) while merchant services acquisition propped up card fee revenue. However, a downward revision in 2025 NII guidance to 2024 levels was a dampener.

Key monitorables

• Monetary policy and interest rates

• Regulatory scrutiny

Healthcare: Digital tech propels growth

The Healthcare sector enjoyed a robust 2Q driven by resilient demand, cost-cutting measures and product launches. The highest number of companies (87%) posted revenue above Street expectations, while the revenue growth of 10.9% was the second-highest among all the sectors. Earnings grew 8%. Innovation, particularly in medical technology, coupled with improved operations, contributed to above-analyst-expectation earnings.

Pfizer: The company reported a strong quarter. Revenue inched up 10% y/y to $14.7bn, despite pricing pressures, patent expirations and other challenges. The company made money via key medicine sales and cost-cutting (e.g. reducing R&D spending), helping it top Street estimates.

Merck and Co.: The behemoth had a mixed but successful quarter. Revenue stood at $15.8bn – a 2% y/y decline. However, Merck beat analyst expectations because of its winning cancer drug – Keytruda. The Animal Health division demonstrated strength, driven by demand for companion animal products and livestock health solutions.

Key monitorables

• Policy and regulatory changes

• Digital health and AI

Consumer: Tariffs creating turbulence to companies and consumers

The Consumer Staples sector’s revenue grew 1.3% in 2Q – a slight improvement from the +0.2% in 1Q – but the top line growth could not prevent it from sitting at the bottom of the leaderboard. Earnings declined c.1% y/y, due to tariffs-related cost pressures. However, over 80% Consumer Staples companies posted a positive earnings surprise, indicating that the Street had set a very low bar. In the Consumer Discretionary sector, revenue grew c.5%, while earnings grew at a slower 3% y/y, mirroring margin pressures. Over 70% companies posted a positive EPS surprise, led by Amazon, Carnival Corp. and TJX, while Tesla and Starbucks were the laggards. Both the sectors underperformed the S&P 500’s 10.8% growth. Meanwhile, the S&P 500 Consumer Discretionary Index (up 2.0%) has been the second-worst performing index to date this year. On the other hand, the S&P 500 Consumer Staples Index has risen 5.5% YTD.

• Amazon: Amazon reported better-than-expected 2Q results, driven by the continued strength in the high-margin AWS business and strong performance in advertising services. Revenue and operating income exceeded the higher end of company guidance. However, management provided soft operating income outlook for 3Q amid uncertainty around geopolitical conditions, tariffs and trade policies. Advertising business was a bright spot, expanding 22%, and continued to outpace Amazon’s core retail business growth.

• Walmart: Despite higher 2Q revenue than Street , Walmart missed EPS estimate for the first time in more than three years, due largely to higher self-insured general liability claims expense. However, it raised 2025 (ending January 2026) revenue and EPS outlook despite higher tariff costs expectations ahead. There were many other bright spots, including relentless market share gain in grocery, improving performance in general merchandise, strong growth in e-commerce and continued strength in the advertising business.

• Tesla: The Elon Musk-led company once again missed revenue and profit Street in 2Q. Total revenue fell 12%, while automotive revenue plunged 16% on a 13% decline in vehicle deliveries and lower average selling prices, exacerbated by lower regulatory credit revenue. Also, TSLA highlighted tariff headwinds to operating margins and supply chain disruptions ahead. Furthermore, the ‘big beautiful bill’ is expected to adversely impact its business as it ends a federal $7,500 EV tax credit at the end of September.

• Target: Target posted and reiterated its full-year 2025 outlook, which was cut in May. However, the dismal performance continued, marked by a decrease in same-store sales driven by lower traffic and average ticket (with margin pressured by higher markdowns), and an unfavourable category mix. The company continues to struggle to return to growth and expects full-year revenue to decline in low-single digits, with continued elevated cost

Key monitorables

• Tariff headwinds: Tariffs would have a negative impact on supply and push prices higher, resulting in subdued consumer spending and retailer margins.

• The US Fed’s interest rate-cut

Energy: Profit sinks as oil prices fall

The energy sector witnessed a challenging 2Qas it reported the largest quarterly earnings decline (-19.5%). A y/y slump in crude oil prices and realisations dragged the earnings of upstream and integrated names. The average 2Q25 oil price of $63.68 was 21% down from 2Q24’s $80.66, as OPEC+ ramped up output and the US maintained robust production.

Exxon: Exxon reported 2Q earnings of $1.64bn – the lowest quarterly figure in four years. However, Exxon-Mobil’s production saw an increase of 4.6m oil-equivalent barrels per day, translating into a record second-quarter output since their merger more than 25 years ago. Also, production in the Permian Basin peaked at 1.6m b/d.

Chevron: Chevron reported 2Q net income of $1.77bn, down from $4.4bn a year earlier. Permian Basin production increased to 1m b/d, while US and worldwide production touched lifetime highs.

Key monitorbles

• Underscoring demand weakness in 2Q, especially from China, Japan, Brazil, Egypt and India, the International Energy Agency (IEA) trimmed its 2025 and 2026 oil demand growth estimates in its August report, with global oil demand now projected to increase by 680kb/d for 2025 (vs earlier) and 700kb/d for 2026 (from 720kb/d) to reach 104.4 mb/d in 2026. Additionally, it has revised downwards the global oil demand growth for 2025 since the beginning of the year by a cumulative 350kb/d. Therefore, continued slowdown in China’s GDP could limit crude oil demand and margins going ahead

• Near-term direction hinges on supply discipline of OPEC+ amid moderating demand and China headwinds.

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Sources:

• CME FedWatch – CME Group

• S&P 500 Daily Global index dashboard

• FactSet Earnings Insight

• Oil Market Report - August 2025 – Analysis - IEA

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