European Earnings Revision Momentum Hits Two-Year High
Alina Collins
Analyst upgrades on European corporate earnings are running at their fastest since mid-2024; this quarter's profits are forecast to grow 12% — the highest in over three years — yet the elevated bar itself is now the biggest earnings-season risk.
Two years of downgrades just reversed — what happened?
Citi's European earnings-revision index has stayed positive for ten consecutive weeks — upgrades outnumbering downgrades.
This means → for nearly two years analysts were almost exclusively cutting forecasts; the direction has now fully flipped.
The last comparable streak was roughly two years ago, but back then revisions turned negative again weeks before reporting season — whether this time holds is still unproven.
How much growth is expected, and who leads?
Bloomberg Intelligence data shows European corporate profits are forecast to grow 12% this earnings season — the highest pace in over three years.
Energy companies benefit from elevated oil prices; banks are seen as beneficiaries of Europe's AI adoption and are expected to post strong results again.
In plain terms = the improvement is not single-sector — energy and financials are firing simultaneously.
What are the big houses saying?
Morgan Stanley's chief European equity strategist Marina Zavolock raised her 2026 earnings-growth forecast for MSCI Europe constituents to 12.5% and expects the benchmark to gain another 10% over the next year.
Her thesis: European earnings are "misunderstood and undervalued," benefiting from inflation, AI, and global diversification.
BlackRock International's Helen Jewell added that European equities' breadth can hedge the crowdedness in AI stocks, with resilient earnings expectations.
Is money following?
Per Citi citing EPFR Global, European equity funds saw net inflows of roughly $400 million in the week to July 8.
This means → investors are gradually returning to European assets, but the scale remains modest — far from a stampede.
The Stoxx Europe 600 outperformed the S&P 500 last month, partly boosted by easing geopolitical risk after Iran's interim peace deal.
Is the high bar itself a risk?
Some market participants warn that the elevated earnings baseline is already fueling concerns about misses.
Put simply = the higher expectations climb, the harder the hurdle for "beating estimates"; any shortfall could pressure share prices.
Geopolitical tensions have re-escalated recently, although oil prices remain below conflict-peak levels — an additional layer of uncertainty.
Content is for reference only, not financial advice.