Freedom Broker: the US earnings season will be the market’s main test

Freedom Broker analysts believe that the US corporate earnings season that has begun will be a key test for the American stock market. Despite an expected year-on-year increase in S&P 500 companies’ profits of more than 20%, current equity valuations already reflect a high level of optimism. In this situation, even strong financial results may fail to become a driver of further gains if companies are unable to exceed investors’ expectations. Read more about the reporting season in Freedom Broker analysts’ biweekly review.

Why the earnings season matters so much

The corporate earnings season is one of the most important periods for the stock market. This is when the largest public companies disclose quarterly financial results and update their business outlooks. These data largely determine the subsequent dynamics of quotations and investor sentiment.

According to Freedom Broker analysts, the market is entering the new season with unusually high expectations. According to the Bloomberg consensus forecast as of July 13, the total profit of S&P 500 index companies in the second quarter of 2025. At the same time, just three months ago analysts expected growth of only 18.3%.

The main risk: market expectations are already too high

As Freedom Broker analysts note, investors are counting not only on strong financial results, but also on another series of positive surprises. In the first quarter of 2026, S&P 500 companies’ actual profit was on average 16.3% above consensus forecasts — the largest beat over the period under review. In the second quarter, the market also expects actual figures to exceed forecasts by about 14.5%, whereas the five-year average is around 7%.

In analysts’ view, this is precisely what makes the current earnings season particularly sensitive. Even a formal beat versus consensus may be insufficient to support prices if actual growth rates, management guidance, or margin commentary fail to confirm the optimism priced in by the market, the Freedom Broker investment review says.

Alphabet and  Lockheed Martin will be in the spotlight

In the coming weeks, Freedom Broker analysts recommend closely monitoring reports from the largest technology and defense companies.

Alphabet (GOOGL) will present results on July 22. In the previous quarter, the company increased revenue by 22% to $109.9 bn, operating profit by 30% to $39.7 bn, and net income by as much as 81% to $62.6 bn. One of the main drivers remains the development of the cloud business: Google Cloud revenue grew by 63%, reaching $20 bn. Investors will assess the sustainability of growth in the advertising business and the cloud segment, as well as the returns on large-scale investments in artificial intelligence.

The next day, July 23, Lockheed Martin (LMT) will report. In the first quarter, the company’s sales totaled $18 bn, earnings per share reached $6.44, and segment operating profit was $1.8 bn at a 10.1% margin. Despite negative free cash flow due to high capex and R&D investments, analysts note steady demand for defense products and long-term support for the business from government contracts.

What this means for investors

According to Freedom Broker analysts, the current earnings season could determine the further direction of the US market. On the one hand, strong financial results may support gains in the S&P 500. On the other, if company guidance or management commentary comes in weaker than expected, investors may start taking profits, especially in stocks with high multiples and significant gains in recent months.

The spring earnings season

The previous US corporate earnings season turned out much stronger than the market expected, experts noted. Many of the largest companies not only beat consensus forecasts for revenue and earnings, but also raised full-year targets. Technology-sector representatives investing heavily in artificial intelligence stood out in particular. For example, Cisco Systems (CSCO) reported order growth across all key business areas, a 12% increase in revenue to $15.8 bn, and improved its fiscal-year outlook, after which its shares rose 13.4% in a day. 

AMD (AMD) also posted results above expectations; its revenue increased by almost 40% to $10.3 bn. The company raised its estimates for the server-CPU market and forecast multibillion-dollar revenue from AI accelerators next year, which led to its share price rising by at least 17%. A strong report was also posted by Palantir Technologies (PLTR), confirming steady demand for AI solutions, government digital projects, and streaming services. It was precisely thanks to a series of such reports that investors entered the new season with substantially higher expectations for corporate results. 

This is not an individual investment recommendation.