Sell-side signals short-term pain, long-term gain

Global margin expectations were revised lower in the first half of 2025 as sell-side analysts priced in more than $1 trillion of unanticipated costs. By mid-year, the reset was largely complete. Fiscal year 2025 margin growth fell from 80 bps to 45 bps — still positive year over year, but with a decisive 35 bps haircut locked in as fourth-quarter earnings season progressed. The out-years tell a different story. Forward earnings expectations traced a U-shaped recovery, but one that was highly concentrated: just 10 companies account for the majority of the rebound in earnings expectations through 2026 and beyond. 

• H1 margin reset: Sell-side analysts repriced global margins lower in the first half of 2025 as more than $1 trillion of unanticipated costs were absorbed across roughly 9,000 companies, based on a bottoms-up aggregation of sell-side consensus estimates from S&P Capital IQ and Visible Alpha.
• H2 recovery in expectations: The second half saw a notable rebound in forward earnings, with out-year forecasts pointing to higher aggregate profitability, even as 2025 pressure remained.
• Recovery driven by the ‘AI 10’: Approximately two-thirds of the earnings recovery in the second half of 2025 is attributable to 10 companies centered on the AI trade. These companies account for nearly all expected margin recovery, while the broader market remains below January expectations.
• Pricing divergence: While sell-side revisions point to lower near-term earnings growth and a delayed recovery, equity valuations have increased more broadly. The result is a growing divergence between how earnings expectations and market pricing evolved through 2025, particularly between the AI 10 and the rest of the market.
• Early-2026 extension: Resetting the reference point to Jan. 1, 2026, FY2026 earnings expectations have already risen by $130 billion through Feb. 1, with roughly 73% of the increase concentrated in just five of the AI 10 companies.

Explore the data used to conduct this research:

Visible Alpha Estimates and S&P Capital IQ Estimates

The S&P Capital IQ and Visible Estimates datasets combine the forecasts, assumptions, and logic from full working sell-side models with a comprehensive global contributor network and deep history to provide the most powerful estimate platform in the market. Through the breadth of S&P Capital IQ Estimates and the granularity of Visible Alpha Estimates, the data provides both scale and precision, enabling better forecasting, benchmarking, and decision-making.

Visible Alpha’s deep consensus data provides a quick understanding of the sell-side view on a company or industry at an unprecedented level of granularity, timeliness, and interactivity, leading to a deeper understanding of what is driving a company’s future performance through complete product, segment, and industry forecasts. S&P Capital IQ estimates complement this depth with the breadth of an extensive broker contributor network for a broader consensus view, additional company coverage, and historical data back to 1996, allowing for consistent and accurate historical analysis across different regions and economic cycles.