By Christopher Combs, Silicon Valley Capital Partners — October 31, 2025
The Q3 2025 earnings season is delivering a wealth of data, and I believe there are eight particularly important observations that deserve attention. These insights matter not only for how markets are digesting results today, but also for how portfolios should be positioned going into Q4 and beyond.
1) The “beats”-rate remains unusually high
Despite persistent macro headwinds (inflation, tariffs, supply chain noise), the ·S&P 500 is seeing an exceptional frequency of companies beating earnings estimates. According to FactSet Research Systems, 83% of S&P 500 firms that have reported have posted EPS above consensus, which is above the 5-year average (~78%) and the highest since Q2 2021.
Another source (IndexBox) puts this beat rate at ~85% of companies, calling it “the highest rate in four years.” IndexBox
Implication: The standard of success is high. A beat is increasingly table-stakes rather than a differentiator.
2) It’s a dual engine: sales and margins
The beats aren’t just from cost cuts; a meaningful portion is from revenue upside plus margin expansion. FactSet shows revenue surprises of ~79% of reporting firms, also above average.
Additionally, margins remain slightly elevated: FactSet lists a blended net profit margin of ~12.9% for the quarter, up from ~12.5% a year ago.
This dynamic suggests that companies are still getting top-line support (i.e., demand resiliency) and cost discipline/margin control — a potent combination.
3) But – the market isn’t rewarding all of the beats
Here’s a key nuance: while beats are widespread, the market reaction is mixed. Many companies post EPS surprises but still see muted stock reactions or even declines when guidance is weak, capex is up sharply, or margins are under pressure for next year.
In short: a beat is no longer enough. Quality of the beat, sustainability of the business model, and credibility of forward guidance matter. As one commentary put it: “the numbers may be strong, but companies’ commentary is where the concern lies”. Barron’s
Implication: Investors should shift from did they beat to should they be rewarded for that beat. The forward lens is increasingly important.
4) S&P 500 Q3 2025 EPS growth is tracking ~8% y/y, and shows deceleration
On a blended basis, the S&P 500’s earnings growth for Q3 is estimated at ~8.0% year-over-year as of Sept. 30, up from ~7.3% at end of June. Some more recent FactSet data suggest as high as ~10.7% depending on sample and reporting coverage.
Regardless of the exact number, the key theme is deceleration from the strong growth rates seen in Q2 (~14%+).
Implication: While growth remains positive, the “easy earnings compare” are behind us, meaning future growth may face more headwinds — thereby placing greater emphasis on quality over quantity.
5) Company guidance & analyst earnings revisions are solid
A positive countertrend: the number of companies issuing positive EPS guidance and the degree of upward analyst revisions are both above historical averages. FactSet reports that for Q3 2025, 49% of companies issuing guidance in the S&P 500 gave positive guidance (55 out of 112) above the 5-year average of ~43%.
Moreover, analysts’ estimate revisions during the quarter were marginally positive — a meaningful change since revisions have been negative in many recent cycles.
Implication: Forward momentum still exists, and companies appear confident enough to project better outcomes. That provides some underpinning for valuation expansion (though not guaranteed).
6) Mega-cap AI capex continues to exceed expectations
Across large technology and cloud companies, infrastructure / datacenter / AI-capex spending is coming ahead of expectations and is becoming a material driver of spend cycles. Commentary in Q3 earnings calls has emphasized “multi-year investment phases” in AI & cloud infrastructure. SoFi+1
For example: companies are guiding higher capex in 2026 tied to AI readiness — a signal that the digital infrastructure build-out remains intact.
Implication: For investors, this reinforces the “capex supercycle” thematic. It implies opportunities not only in direct tech names but also in equipment, power, cooling, semiconductor, and interconnect segments.
7) Large-cap U.S. companies are increasingly focused on labor efficiency
With revenue growth under pressure to some extent and margins needing to be maintained, many large-cap firms are referring to productivity-enhancement, automation, AI-led workforce rationalization, and headcount discipline in their commentary. For example, recent strategy notes highlight that while employment remains steady, the push is more towards “doing more with fewer” and re-allocating talent to AI/automation-enabled processes. SoFi
Implication: Labor cost remains a lever for margin improvement, but companies that emphasize this may generate better operating leverage. From a portfolio perspective, this gives added weight to names with structural productivity drivers rather than cyclical labor-intensive models.
8) Bank lending & the corporate credit cycle are under scrutiny
Corporate credit and bank lending data are signaling caution: for example, the Federal Reserve’s H.8 release shows C&I loan growth remains tepid; the Senior Loan Officer Opinion Survey (SLOOS) indicates modest net tightening of standards. FinancialContent+1
While most large-cap companies are not adversely affected at this stage, the broader credit cycle matters for risk assets, capital expenditures, and M&A activity.
Implication: For risk management, companies with weaker balance sheets or heavy reliance on floating-rate debt may face amplified pressure. Credit conditions can become a hidden drag on earnings, even in a strong earnings-beat season.
Strategic Implications & Portfolio Guidance
Bringing these eight observations together, here’s how we view positioning and how you might think about tilting portfolios:
- Lean into quality growth: With high beat rates and decelerating growth, the differentiator is quality—companies with structural growth drivers (AI, automation, productivity) and good cash-return discipline.
- Be selective in capex exposure: The AI/capex theme remains alive, but not all capex creates value. Focus on companies with visible ROI, backlog, pricing power, and acceptable margins.
- Elevate forward signals: Because beats are broadly expected, the market increasingly rewards forward-looking signals (guidance, revisions, capital allocation) rather than just the print.
- Balance risk in credit/light leverage names: With credit conditions tighter, favor corporates with strong balance sheets, moderate leverage, and access to liquidity.
- Watch margin conversion: Revenue growth alone isn’t enough; margin expansion or at least preservation is critical. Labor efficiency, automation and capex rationalization are important.
- Mind valuation discipline: Even with strong earnings, valuations (forward P/E for S&P 500 ~23x) are elevated by historical norms. Prioritize names where structure justifies premium.
- Stay alert for deceleration: While growth remains positive, we believe the pace will moderate further in 2026. Investors should monitor for early signs of margin compression, spending tapering, or credit stress.
Final thoughts
The Q3 2025 earnings season is broadly ahead of expectations, particularly given the challenging macro backdrop. But as we emphasize at Silicon Valley Capital Partners, the context of the beat—and the forward story—are now more important than ever.
Earnings beats show that many companies are executing well. But with elevated expectations, decelerating growth, and rising complexity (capex, labor, credit), the reward for execution may be increasingly selective.
As we position portfolios into year-end, the premium will go to companies that not only beat today, but also articulate credible plans for tomorrow—preferably centered on real structural growth (not just cyclical bounce) and with margins and capital allocation intact.
We will continue to monitor developments in the coming weeks (including Q4 guidance, spending patterns, and credit flows) and remain disciplined in deploying capital where we see asymmetric upside and manageable downside.
— Christopher Combs
Silicon Valley Capital Partners