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{\"0\":\"The Q3 earnings estimate revisions trend has remained positive since April. \",\"1\":\"Q3 earnings are expected to grow 5.1% on 6% higher revenues. \",\"2\":\"We include the recent ADBE and ORCL releases in the Q3 tally.\"}
We include the recent results from Oracle (ORCL - Free Report) and Adobe (ADBE - Free Report) for their respective fiscal quarters ending in August as part of the September-quarter tally. The Q3 reporting cycle will really get underway when the big banks release their results on October 14, but we will have already seen fiscal August-quarter results from almost two dozen S&P 500 members by then. We have five such companies on deck to report results this week, including FedEx, Lennar, and Darden.
Adobe beat estimates and modestly raised guidance, but the results fail to challenge the prevailing bearish narrative on the stock. At the core of this bearish narrative is the view that Adobe will be unable to sustain its software niche in the coming AI-centric world.
A similar narrative has partly been at play in the case of Alphabet (GOOGL - Free Report) , where skepticism centers on the sustainability of Google’s search dominance. Unlike Adobe, however, Alphabet has a number of other businesses that it can lean on going forward, though any threat to the search cash cow is understandably a significant concern.
Adobe shares have lost approximately one-third of their value over the past year, lagging behind the broader market and the Tech sector, as the chart below illustrates.
Image Source: Zacks Investment Research
As you can see above, the above chart also includes Oracle (up +81.8% over the past year) and Alphabet (+53.4%). Oracle’s quarterly results were off-the-charts good, with the company’s backlog gains and management’s outlook for the coming periods exceeding even the most bullish sell-side estimates by big margins.
Adobe’s fiscal year ends in November, so its next quarter will be its fiscal fourth quarter. With only one quarter to go, Adobe’s earnings for the current year are on track to be up +12% on +9.6% higher revenues. For next year, the expectation is of +12.8% earnings growth on +9.2% revenue gains. These growth numbers aren’t terribly out of line with the company’s recent history, but the stock’s recent performance suggests that the bearish narrative now represents the prevailing view on the stock. As a result, ADBE shares currently trade at their lowest valuation multiple in more than 10 years, as the chart below shows.
Image Source: Zacks Investment Research
The question at this stage is whether this software name has finally become a ‘value’ play or is it a ‘value trap’?
The expectation is for Q3 earnings to increase by +5.1% from the same period last year on +6% higher revenues. This would follow earnings growth rates of +12.5% and +12.3% in 2025 Q2 and Q1, respectively.
In the unlikely event that actual Q3 earnings growth for the S&P 500 index turns out to be +5.1% as currently expected, this will be the lowest earnings growth pace for the index since the +4.4% growth rate in 2023 Q3.
We have been regularly flagging in recent weeks that the estimate revisions trend has been positive since late April, after remaining under pressure in the months leading up to that point. You can see this in the chart below, which plots how 2025 Q3 earnings growth expectations evolved in recent weeks.
Image Source: Zacks Investment Research
Since the start of July, Q3 earnings estimates have increased for 5 of the 16 Zacks sectors, which include the Tech, Finance, and Energy sectors.
While Q3 estimates for the remaining 11 sectors have been under pressure, the favorable revisions trend for the Tech and Finance sectors is more than enough to offset their effect on the aggregate trends at the index level, as these two sectors alone account for more than 50% of the index’s total earnings.
On the negative side, estimates for 11 of the 16 Zacks sectors have been under pressure since the start of the quarter, with notable declines in the Medical, Transportation, Basic Materials, and Consumer Staples sectors, among others.
The Tech sector, which has been a standout growth driver in recent quarters, is expected to continue playing that role in 2025 Q3 as well, with total earnings for the sector expected to be up +12% on +12.5% higher revenues. Had it not been for the strong growth contribution from the Tech sector, total S&P 500 earnings growth for Q3 would be only up +2% (instead of +5.1% otherwise).
The chart below illustrates the Tech sector’s earnings and revenue growth picture on a quarterly basis, comparing expectations for 2025 Q3 with actual growth for the preceding two periods and expectations for the following three quarters.
Image Source: Zacks Investment Research
As noted earlier, Q3 estimates for the Tech sector have been trending higher since the quarter got underway, as the chart below shows.
Image Source: Zacks Investment Research
The Earnings Big Picture
The chart below shows current Q3 earnings and revenue growth expectations for the S&P 500 index in the context of the preceding 4 quarters and the coming three quarters.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on a calendar-year basis.
Image Source: Zacks Investment Research
In terms of S&P 500 index ‘EPS’, these growth rates approximate to $257.93 for 2025 and $290.26 for 2026.
Image: Bigstock
Q3 Earnings Season Gets Underway: A Closer Look
Key Takeaways
We include the recent results from Oracle (ORCL - Free Report) and Adobe (ADBE - Free Report) for their respective fiscal quarters ending in August as part of the September-quarter tally. The Q3 reporting cycle will really get underway when the big banks release their results on October 14, but we will have already seen fiscal August-quarter results from almost two dozen S&P 500 members by then. We have five such companies on deck to report results this week, including FedEx, Lennar, and Darden.
Adobe beat estimates and modestly raised guidance, but the results fail to challenge the prevailing bearish narrative on the stock. At the core of this bearish narrative is the view that Adobe will be unable to sustain its software niche in the coming AI-centric world.
A similar narrative has partly been at play in the case of Alphabet (GOOGL - Free Report) , where skepticism centers on the sustainability of Google’s search dominance. Unlike Adobe, however, Alphabet has a number of other businesses that it can lean on going forward, though any threat to the search cash cow is understandably a significant concern.
Adobe shares have lost approximately one-third of their value over the past year, lagging behind the broader market and the Tech sector, as the chart below illustrates.
Image Source: Zacks Investment Research
As you can see above, the above chart also includes Oracle (up +81.8% over the past year) and Alphabet (+53.4%). Oracle’s quarterly results were off-the-charts good, with the company’s backlog gains and management’s outlook for the coming periods exceeding even the most bullish sell-side estimates by big margins.
Adobe’s fiscal year ends in November, so its next quarter will be its fiscal fourth quarter. With only one quarter to go, Adobe’s earnings for the current year are on track to be up +12% on +9.6% higher revenues. For next year, the expectation is of +12.8% earnings growth on +9.2% revenue gains. These growth numbers aren’t terribly out of line with the company’s recent history, but the stock’s recent performance suggests that the bearish narrative now represents the prevailing view on the stock. As a result, ADBE shares currently trade at their lowest valuation multiple in more than 10 years, as the chart below shows.
Image Source: Zacks Investment Research
The question at this stage is whether this software name has finally become a ‘value’ play or is it a ‘value trap’?
The expectation is for Q3 earnings to increase by +5.1% from the same period last year on +6% higher revenues. This would follow earnings growth rates of +12.5% and +12.3% in 2025 Q2 and Q1, respectively.
In the unlikely event that actual Q3 earnings growth for the S&P 500 index turns out to be +5.1% as currently expected, this will be the lowest earnings growth pace for the index since the +4.4% growth rate in 2023 Q3.
We have been regularly flagging in recent weeks that the estimate revisions trend has been positive since late April, after remaining under pressure in the months leading up to that point. You can see this in the chart below, which plots how 2025 Q3 earnings growth expectations evolved in recent weeks.
Image Source: Zacks Investment Research
Since the start of July, Q3 earnings estimates have increased for 5 of the 16 Zacks sectors, which include the Tech, Finance, and Energy sectors.
While Q3 estimates for the remaining 11 sectors have been under pressure, the favorable revisions trend for the Tech and Finance sectors is more than enough to offset their effect on the aggregate trends at the index level, as these two sectors alone account for more than 50% of the index’s total earnings.
On the negative side, estimates for 11 of the 16 Zacks sectors have been under pressure since the start of the quarter, with notable declines in the Medical, Transportation, Basic Materials, and Consumer Staples sectors, among others.
The Tech sector, which has been a standout growth driver in recent quarters, is expected to continue playing that role in 2025 Q3 as well, with total earnings for the sector expected to be up +12% on +12.5% higher revenues. Had it not been for the strong growth contribution from the Tech sector, total S&P 500 earnings growth for Q3 would be only up +2% (instead of +5.1% otherwise).
The chart below illustrates the Tech sector’s earnings and revenue growth picture on a quarterly basis, comparing expectations for 2025 Q3 with actual growth for the preceding two periods and expectations for the following three quarters.
As noted earlier, Q3 estimates for the Tech sector have been trending higher since the quarter got underway, as the chart below shows.
The Earnings Big Picture
The chart below shows current Q3 earnings and revenue growth expectations for the S&P 500 index in the context of the preceding 4 quarters and the coming three quarters.
The chart below shows the overall earnings picture on a calendar-year basis.
Image Source: Zacks Investment Research
In terms of S&P 500 index ‘EPS’, these growth rates approximate to $257.93 for 2025 and $290.26 for 2026.
For a detailed view of the evolving earnings picture, please check out our weekly Earnings Trends report here >>>>Previewing Q3 Earnings Expectation: Good or Bad?