Equity Markets Are Booming Despite Geopolitical Tensions – Why is that?

Positive surprises in earnings and revenue growth for the first quarter have temporarily overshadowed concerns regarding high energy prices and supply chain bottlenecks. The US earnings season is approaching its peak, and investors appear to be positively surprised amid the current geopolitically uncertain environment.

Is the situation less severe than expected?

As of April 30, 2026, approximately 60% of S&P 500 companies have reported their quarterly results. Analysts’ estimates seem to have been overly cautious once again. Earnings have exceeded expectations by an average of 30%, while revenue growth of currently 11.5% has also surpassed forecasts. Analyst estimates for 2026 therefore appear to have upward revision potential, as many companies’ outlooks have so far been more optimistic than expected (Source: Bloomberg, 30.4.2026).

During the week of April 27 to May 1, 2026, more than one-third of S&P 500 companies reported results. On April 29, 2026, the earnings releases of the so-called "Mega-Cap" companies – Amazon, Alphabet, Meta Platforms, and Microsoft – marked the preliminary peak of the reporting season, representing a combined market capitalization of USD 11.3 trillion at that time (Source: Bloomberg, 30.4.2026).

“Big Tech”

Alphabet, the parent company of Google, reported a quarterly profit for Q1 2026 that was more than 80% higher than in the prior-year period. Revenue growth of +22% also exceeded consensus expectations. The growth could have been higher if not for current shortages in required computer hardware.

Amazon generated revenues exceeding USD 180 billion, driven by strong growth in its cloud division AWS and increased advertising revenues, resulting in earnings per share significantly above forecasts.

Microsoft also reported substantially higher profits than analysts had anticipated, with quarterly revenues of USD 81.4 billion.

Meta Platforms (operating Facebook, Instagram, WhatsApp) reported earnings above expectations as well. With quarterly revenues of USD 56.3 billion, net income amounted to USD 26.7 billion, of which approximately USD 8 billion resulted from a tax credit.

The tech companies that have reported so far plan to invest over USD 600 billion in hardware this year, particularly in data centers. This investment volume is one reason why certain analysts and investors are scrutinizing the business models of the so-called “hyperscalers” more closely.

Energy Market Impact and Sectoral Performance

Outside the Mega-Caps, the energy market disruptions have led to varied corporate responses. Companies directly affected by current high energy prices are cautious with their forecasts. Airlines and transport companies attempt to reassure investors by referencing hedging programs, price increases, or operational optimizations.

Double-digit earnings growth has been reported not only by oil majors but also by suppliers in the oil and gas industry, as well as industrial companies such as Caterpillar and the German chemical group BASF.

The persistent strong demand for memory chips has resulted in substantial revenue and profit increases in this subsector. Consumer goods and pharmaceutical companies show more moderate growth, with mid-single-digit percentage increases.

European Corporate Performance

In Europe, only about one-quarter of the largest 600 companies have reported their results so far. Earnings growth currently stands at approximately 11%, while revenue growth remains in the low single-digit range (Source: Bloomberg, 30.4.2026). On a sector level, energy, communication services, and the financial sector have performed above average, whereas healthcare, industrials, and utilities show declining growth rates.

The proportion of European companies reporting positive earnings surprises is around 53%, compared to 79% for US companies to date (Source: Bloomberg, 30.4.2026).

Since the beginning of the year, the US market has outperformed Europe. Europe lags behind in AI-driven growth due to the lack of large players and is more affected by the energy shock than the US.

Kathrein Investment Strategy

In our investment strategy, we reduced the overweight position in the European market as of the end of March 2026. In our US equity portfolio, we apply a selective stock-picking approach and maintain a more cautious stance towards the so-called Magnificent Seven companies (Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla) compared to the global equity markets.

Disclaimer:
This document is a marketing communication of Kathrein Privatbank Aktiengesellschaft within the meaning of the Austrian Securities Supervision Act 2018 and serves exclusively for informational purposes. This information aims to provide a general overview of current market data and Kathrein’s market opinion and does not constitute a direct or indirect recommendation for a specific investment strategy or financial analysis. Investments in securities are subject to price fluctuations due to market changes at any time. Data and representations relating to past performance do not allow reliable conclusions about future results. Despite careful research and recording, no liability or guarantee can be assumed for the accuracy of the data.