Graph showing growth ©Adobe Stock Images
UBS has raised its outlook for Eurozone corporate earnings in 2026 after second-quarter results showed stronger and more widespread profit growth across the region.
The bank now expects earnings for the EuroStoxx 50 to increase by around 15% this year, up from its previous forecast of 8%. For broader Eurozone indices, the estimate was raised from 11% to approximately 15%. UBS maintained its 2027 earnings growth forecast at 15%.
Second-quarter earnings growth accelerates
With most companies having now reported, Eurozone earnings are growing by approximately 22% year on year, according to UBS. Excluding the energy sector, growth is running at around 11%.
That compares with overall earnings growth of approximately 12% during the first quarter, indicating that corporate profitability gained momentum as the year progressed.
Cost discipline continues to support margins, but UBS expects revenue growth to play an increasingly important role as manufacturing conditions improve, currency-related pressures ease and companies benefit from stronger operating leverage.
Profit growth spreads across European sectors
The earnings recovery is becoming increasingly broad, with UBS forecasting profit growth across every sector this year.
Financial companies are experiencing renewed momentum as demand for loans improves and capital markets activity strengthens. Industrials are benefiting from investment linked to artificial intelligence, electrification and defence, alongside improving cyclical conditions in areas including automation.
The combination suggests the Eurozone earnings recovery is no longer concentrated in a small number of industries, providing a potentially stronger foundation for the regional equity market.
UBS upgrades European technology sector
UBS also upgraded European information technology to Attractive following the sector’s recent market correction.
The bank said valuations are no longer excessively stretched, while renewed earnings momentum offers additional support. Rising expectations for AI-related semiconductor capital expenditure are also improving the outlook for European technology companies.
Analyst sentiment has strengthened more broadly. UBS said the breadth of earnings estimate revisions has reached its strongest level in three years.
Meanwhile, global manufacturing PMIs have recovered into the low-to-mid 50s, levels which have historically been associated with the end of corporate earnings downgrade cycles.
Banks and industrials among UBS preferred sectors
UBS maintained its Attractive stance on European equities, with a particular preference for the Eurozone.
The bank favours banks, industrials, consumer discretionary companies, healthcare and information technology, while also highlighting Germany as an attractive market.
Germany’s fiscal support is expected to provide an additional tailwind as increased spending feeds through to economic activity and corporate earnings.
With profit growth accelerating, analyst revisions improving and the earnings recovery spreading across sectors, UBS sees a stronger fundamental backdrop for Eurozone equities heading through the remainder of 2026 and into 2027.