Storm clouds gather for Q3 earnings amid macro headwinds, tech slowdown De Investing.com

Investing.com — As the curtain closes on a “generally good” quarterly earnings season for corporate America, Barclays warns of an uncertain path for earnings next quarter, paved with continued slowdown in tech earnings and headwinds macroeconomics.

“3Q24 EPS has been revised down by nearly -5% since May, and Y/Y growth is expected to more than halve from this reporting season,” Barclays analysts noted, signaling potential challenges ahead .

The gloomy outlook for current quarter earnings pales in comparison to Q2 2024, which saw earnings per share grow by 11.7%, the highest in two years, with about 81.2% of companies beating EPS estimates.

But while Q2 earnings mostly beat expectations, the surprise factor, or beating margin, was “modest,” analysts note, dropping the aggregate surprise to 4.1 percent below the long-term average.

The little surprise factor this season was set before earnings season officially began, as a number of companies reported negative revisions leading into earnings reports.

Financial services was the biggest winner, with “the biggest EPS surprise in 3 years, with 83% of the sector beating consensus and ahead of estimates,” Barclays said.

Big tech also took its toll on the earnings season — and not in a good way. Big tech EPS growth, which has driven earnings growth for the past two years, suffered a second straight quarter of declining earnings growth and “is also expected to continue to decelerate next quarter,” analysts said.

NVIDIA Corporation (NASDAQ: ), the touch paper for artificial intelligence trading, was particularly notable after posting its weakest 5.4% EPS surprise in seven quarters, along with “modest” sales guidance, have she added.

Earnings growth is not expected to get any help on the macroeconomic front, analysts believe, as uncertainty over whether a soft landing or recession continues to weigh.

“Later estimates (beyond 3Q24) are largely untouched; we believe this reflects growing macroeconomic uncertainty,” they added.