Commencing the Quarter – Q1’25

Earnings season is quickly approaching!

As we do every quarter, we analyzed the earnings communication trends of off-cycle companies reporting over the past month to identify important themes and precedence. These companies span market cap sizes and sectors. We caveat that these earnings calls occurred prior to Trump’s most recent tariff announcement, but we will provide perspective on our expectations for upcoming calls.

In line with preliminary findings from our Inside The Buy-Side® Earnings Primer® — to be released Thursday, April 10 — commentary from recent earnings calls reveals a sharp pullback in tone as executives contend with heightened policy uncertainty and an increasingly downbeat consumer. Executives are striking a more conservative posture toward their 2025 outlooks, acknowledging ongoing macro uncertainty, bracing for various scenarios, and doubling down on factors within their control.

No surprise, trade policy and tariff implications have featured heavily on earnings calls. While emphasizing that much remains to be known, more companies are calling out regional exposures and mitigation plans (as noted, these off-cycle earnings calls occurred prior to Trump’s April 2 ‘reciprocal tariffs’ announcement). Further, amid analyst probing for signs of demand being pulled forward to get ahead of tariffs, most contend they have yet to see evidence of this dynamic, and acknowledge it is hard to track.

Regarding labor and impacts from the Trump administration’s immigration policies, executives largely report no immediate disruptions, while acknowledging the situation bears close watching — both as it relates to available labor supply as well as potential knock-on effects to consumer behavior.

To that end, executives point to waning consumer confidence, with lower income cohorts under the greatest pressure but higher income groups also increasingly cost-conscious, delaying big purchases, and displaying value-seeking behavior.

Amid this challenging environment, companies continue to lean into cost-cutting and expense management initiatives to dampen the impact and protect margins, though investment continues in areas tied to efficiency/productivity and strategic growth levers such as AI and marketing. Globally, executives express mixed views toward the current operating environment, with some pockets of strength emerging in Europe, particularly areas tied to defense spending, while China’s recovery remains uneven.

Key themes

• Macro & Outlook: Companies Brace for Soft Demand, Policy Shifts, and a Downbeat Consumer; “Focus is on What We Can Control”
• Tariffs: Cost Pressures Mount, but Executives Emphasize Agility, Sourcing Shifts, and Pricing Levers as They Await a Clearer Policy Picture
• Pull-forward Demand: Most Executives See Little Evidence Ahead of Tariffs, but Note Customer Elasticity Remains ‘Pretty Uncertain’; With Demand Inflections Looming, Expect This to Be a Key Topic on Upcoming Calls
• Consumer: Confidence Wanes: Execs Point to Delayed Purchasing and Value-Seeking Behavior in Mid- to Lower-Income Levels
• Margins & Efficiency: Cost Cutting and Expense Management a Clear Focus, but Investment Continues in Strategic Areas Such as AI and Sales/Marketing
• Labor & Immigration: No Immediate Disruptions Reported as a Result of Tighter Immigration Enforcement, though Companies Continue to Monitor for Long-Term Workforce and Consumer Impacts
• Around the World: In Europe, Results are Mixed though Strength is Seen in Pockets, Especially in Defense, while China’s Recovery Remains Uneven as U.S. Firms Face Mounting Competitive Pressure