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Q2 Earnings: 80% Beat EPS and 3 Surprises

AlphaPro Editorial4 min read

AlphaPro's 5-Minute Sentiment Wrap

Good morning! Despite tariff talks spooking the market the last quarter, and continuing to do so, Wall Street's outlook is not as bleak as it looked a few weeks ago. At least that's what corporate earnings reflect so far.

Here is a quick snapshot before we move to this week's Deep Dive:

As of writing, roughly one-third of the S&P 500 companies have reported earnings for Q2 2025. Of these, 80% have beaten EPS estimates, which is marginally above the 5-year average of 78% and significantly above the 10-year average of 75% (per FactSet data). Sector-wise, Information Technology, Communication Services, and Financials are leading the pack in terms of beating estimates. At an aggregate level, S&P 500 companies have surpassed estimates by 6.1%, which is in line with the 10-year average of 6.9%.

The Deep Dive: Three Earnings Surprises Last Week

  • This week, we're focusing on three earnings surprises: two positive and one negative.
  • Plus, we'll see what stories their sentiment shifts are telling.

Let's find out…

Alphabet just dropped a strong Q2, beating both revenue and earnings expectations. Sales hit $96.43 billion, about 2.5% ahead of the $94 billion forecast, while EPS landed at $2.31, a solid 5.7% beat versus $2.18 expected.

Ad revenue, still the company's most powerful cash cow, surged 10.4% to $71.34 billion, comfortably beating estimates of $69.47 billion. But the real momentum came from AI and cloud. Google Cloud posted a 32% jump in revenue, far above the ~26% consensus. Notably, Google's AI Overviews are gaining serious traction, hitting 2 billion monthly users, up from 1.5 billion in May. The Gemini app now boasts 450 million active users.

Moreover, the company raised its capital spending target for 2025 to $85 billion (from $75B), signaling long-term conviction

Alphabet's strong Q2 results come against the backdrop of the stock significantly lagging this year: up just 1.9% YTD vs the S&P 500's 8.6%. The valuation is super compelling too - it's trading at just 20.4x forward earnings, well below its 10-year median of 26x. Interestingly, in a market where AI narratives often come at a premium, Alphabet looks like a rare value play within the

Analysts are revising targets too: JPMorgan hiked its price target to $232 (from $200), and BofA now sees it at $217. It's early, but the sentiment tailwinds are building. Check how Alphabet's Earnings Sentiment Score shifted following the earnings call:

Verizon delivered a low-key but meaningful beat in Q2. EPS came in at $1.22 versus expectations of $1.18, which is a 3.4% upside surprise. Revenue rose 5.2% year-over-year, supported by a 2.2% uptick in wireless service revenue, a core pillar of the business.

The real investor magnet, as always, remains the dividend. Verizon yields a juicy 6.4%, and that payout is well-supported by free cash flow. In an uncertain macro environment, if you're looking for income-focused investments, Verizon may just tick the right boxes.

Performance-wise, the stock is nearly flat with the broader market this year: up 7.7% YTD vs 8.6% for the S&P 500. But analysts just got more confident following the Q2 earnings. JPMorgan nudged its target to $49 (from $47), and RBC Capital followed suit, increasing its target to $46. On the Earnings Sentiment Score front, Verizon just made a 4-point jump:

Short story: Tesla Q2 results disappointed with a 12% fall in revenue, the steepest year-over-year decline in a decade. Revenue came in at $22.5 billion, down from $25.5 billion a year ago, as the automotive revenue dropped 16% YoY, continuing a worrisome trend.

Vehicle deliveries slipped 14%, and the stock has taken a hit, down nearly 22% YTD, which makes Tesla the worst performer among the Magnificent Seven this year. Notably, Tesla is facing fierce competition in China and Europe, particularly from cheaper EVs. On top of that, expiring EV credits and tariffs under a second Trump administration could pressure margins further.

Still, sentiment isn't dead. Musk remains defiantly optimistic, touting a driverless robotaxi rollout by year-end (pending regulatory clearance) and promising future cash-generating autonomous cars. AlphaPro's Sentiment Score for Tesla even ticked up slightly post-call, perhaps a signal that Musk's long-term visions still resonate. However, keep an eye on the short-term profitability outlook before rushing in or out.

Before we sign-off

Earnings season has a way of cutting through the noise, and this one is no different. In the middle of developing tariff tensions and macro uncertainty, it's easy to get whipsawed by headlines. But beneath the chaos, corporate performance is still doing most of the talking.

At AlphaPro, we believe that the earnings numbers should be interpreted with the Earnings Sentiment Score, as it captures not just the results, but how executives talk about them. The AlphaPro Earnings Sentiment Score reflects their tone, their guidance, and the language they use during earnings calls, giving you a deeper read on what actually lies ahead.

Same time next week? See you then.

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