Risk shifts from tariffs to geopolitics
12 months ago, 452 S&P 500 companies mentioned ‘tariff’ or ‘tariffs’ on Q1 2025 earnings calls, making trade policy the defining issue of that reporting season. For Q1 2026, geopolitical risk has taken centre stage.
The conflict between the United States (US) and Iran, which began on 28 February, has triggered an energy price shock. Elevated commodity prices feed directly into fuel, logistics, manufacturing inputs and packaging costs, compressing margins for companies with material exposure to energy or freight.
Beyond direct cost pressures, the broader erosion of household purchasing power risks softening consumer demand, even for businesses with limited energy exposure.
Because the bulk of Q1 activity occurred before the conflict erupted, headline earnings numbers will provide limited insight into the true cost impact. The key focus this season will therefore be forward guidance.
Investors should concentrate on three metrics:
Revenue beats: which are often the clearest indicator of underlying demand
Operating margin trends: which reveal how much of the cost increase has been absorbed
Revisions to full‑year guidance: which will determine whether the current consensus forecast of 17.4% full‑year earnings growth remains realistic.
Not all sectors are equal
Eight of the 11 sectors are projected to report YoY earnings growth in Q1 2026:
Information Technology (+45.0%)
Materials (+24.2%)
Financials (+15.1%)
Health Care (-9.8%) is expected to lead the decline, with Merck‘s one-time acquisition charge weighing down on the sector’s growth rate. Excluding Merck, the sector would be on track to report earnings growth of approximately 2.8%.
Energy stands out as the wild card amid the Middle East conflict. Its earnings growth estimate swung from 0.3% at the start of the year to 12.9% on 3 April as higher commodity prices flowed through to upstream earnings, before falling back to -0.1% on 10 April following downward revisions driven primarily by ExxonMobil‘s guidance on production disruptions and hedging losses.
The volatility in the energy sector alone illustrates precisely why forward guidance – rather than the headline growth rate – will define how this earnings season is ultimately judged.
Earnings calendar
The bulk of the earnings season will play out over the next six weeks. The financial sector opens proceedings, with Goldman Sachs and JPMorgan Chase among the first to report.
Technology and consumer heavyweights, including Microsoft, Alphabet, Meta Platforms, Apple and Amazon, dominate the final week of April. NVIDIA, which follows a different fiscal reporting calendar, is scheduled to report in late May.