Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

• For 2025 Q3, total S&P 500 index earnings are expected to be up +5.1% from the same period last year on +5.9% higher revenues.

• Unlike other recent periods, the revisions trend has been positive, with estimates for Q3 modestly up since the quarter got underway. Since the start of July, earnings estimates have increased for 5 of the 16 Zacks sectors, including Tech, Finance, and Energy.

• Q3 earnings estimates have been under pressure for 11 of the 16 Zacks sectors since the start of the period, with the biggest pressure at the Medical, Transportation, Basic Materials, Consumer Discretionary, Consumer Staples, Construction, and Industrial Products sectors. 

• The positive revisions trend makes the overall setup for the Q3 earnings season favorable, but it raises the odds of actual results coming up short of expectations. In other words, it is reasonable to worry whether expectations for the period are too high.

Are Q3 Earnings Expectations Too High?

As we have consistently highlighted in recent weeks, the overall revisions trend remains positive, with estimates for the back half of the year steadily going up.

For 2025 Q3, the expectation is for earnings growth of +5.1% on +5.9% revenue gains. The chart below illustrates the evolution of Q3 earnings growth expectations over recent weeks.

Image Source: Zacks Investment Research

Since the start of Q3 this month, estimates have increased modestly for five of the 16 Zacks sectors, including Finance, Technology, Energy, Retail, and others.

On the negative side, Q3 estimates remain under pressure for the remaining 11 Zacks sectors, with significant declines to estimates for the Medical, Basic Materials, Construction, Transportation, and other sectors.

For the Tech sector, Q3 earnings are expected to be up +12.0% from the same period last year on +12.4% higher revenues. The chart below shows how the sector’s Q3 earnings growth expectations have evolved over the last couple of months.

Image Source: Zacks Investment Research

You can see the Tech sector’s positive revisions trend by looking at bellwether Tech sector operators like Microsoft (MSFT Quick QuoteMSFT - Free Report) , Nvidia (NVDA Quick QuoteNVDA - Free Report) , and others.

Microsoft is currently expected to bring in $3.65 per share in earnings in Q3 on $75.37 billion in revenues, representing year-over-year changes of +10.6% and +14.9%, respectively. Microsoft’s Q3 EPS estimate has increased from $3.64 a month ago and $3.53 two months ago.

The current Q3 EPS estimate for Nvidia has risen +2.6% over the past month and +4.4% over the last two months.

The Earnings Big Picture

The chart below shows expectations for 2025 Q3 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters.

Image Source: Zacks Investment Research

The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.

Image Source: Zacks Investment Research

The aforementioned favorable revisions trend validates the market’s rebound from the April lows. It will be interesting to see if this positive revisions trend will remain in place, as the Q3 reporting cycle gets underway.

The robust backlog numbers from Oracle suggest that the trend can continue. But we have to keep in mind that Oracle’s pipeline strength primarily reflects developments in the artificial intelligence space that were already being credited for the Mag 7 group’s prominence. It remains to be seen whether the favorable trend will be reflected in non-tech areas of the economy.