Energy expected to drive European earnings as underlying growth slows

• Revenue growth follows a similar pattern: STOXX 600 sales forecast to rise 10.5% overall but only 3.9% when energy sector is excluded
• Energy company earnings are expected to more than double in Q2, far outpacing all other industries
• Eight of 10 sectors now expected to show growth compared to five sectors in Q1, indicating gradual broadening of gains despite energy dominance

Summary

European blue-chip earnings are projected to show strong growth in Q2 2026, driven primarily by surging energy sector profits linked to higher oil prices. However, this masks weaker performance across other industries.

Key Figures:

• STOXX 600 companies forecast to report earnings growth of 15.3% for Q2
• Excluding energy sector, earnings growth drops significantly to just 6.0%
• Revenue growth projected at 10.5% overall, but only 3.9% outside energy
• Energy sector earnings expected to more than double year-over-year

Market Implications:

The divergence between headline and underlying growth highlights the European market's heavy dependence on energy sector performance. While breadth is improving—with eight of ten sectors expected to show growth compared to five in Q1—the energy sector's outsized contribution suggests fragility in broader economic momentum.

The data, compiled from LSEG IBES forecasts, indicates that investors should look beyond headline figures to assess true market health. Companies outside the energy sector are experiencing modest growth of under 4% in revenues, pointing to challenging conditions in consumer, industrial, and technology segments.

Sector Focus:

The energy sector's exceptional performance, with earnings more than doubling, significantly outpaces all other industries. This concentration risk suggests European equity markets remain vulnerable to oil price fluctuations and energy market volatility.

The improving sectoral breadth offers some optimism, but the stark contrast between energy and non-energy performance underscores ongoing economic headwinds facing European corporations in the current environment.