Why European Companies Are Forecast to Have Robust Earnings Growth

European company earnings are growing rapidly—and at a faster pace than the euro area economy. The strong earnings have helped the stock market absorb higher bond yields, elevated energy prices, and subdued domestic economic growth, writes Sharon Bell, senior European equity strategist for Goldman Sachs Research, in a report.

What is the forecast for STOXX 600 index earnings?

Our analysts expect earnings per share for the STOXX 600 index of European stocks to grow 18% in 2026 and 7% in 2027. Meanwhile, euro area nominal GDP is forecast to grow 3.3% in 2026 and 2.8% in 2027.

“This raises an important question,” Bell writes. “Why are European earnings proving more resilient than the domestic economy would suggest?”

Are listed companies an accurate representation of the economy?

Investors often use domestic GDP growth to gauge company earnings growth, Bell observes. “But this relationship is far from mechanical and can vary significantly over time,” she adds.

For example, the two were roughly aligned in 2025 when euro area nominal GDP grew around 3.7% while STOXX 600 earnings growth was 2.4%. This year, though, earnings are expected to considerably outpace economic growth. (The STOXX 600 benchmark reflects a broader European footprint than the euro area, spanning companies domiciled in the UK, Switzerland, and Denmark, among others.)

One possible reason why earnings of listed European companies appear to be decoupling from domestic economic growth could be the composition of sectors represented among Europe’s biggest stocks.

“The equity market is a distorted mirror of the economy,” Bell writes. GDP measures value across the entire domestic economy, whereas aggregate market earnings reflect the profits of a concentrated group of large listed companies.

For example, companies in the financial sector account for more than 30% of EURO STOXX earnings (an index of euro area stocks), but only 10% of euro area economic activity. Energy and technology are also more important to listed earnings, while real estate, retail, and industrials have much larger weights in the economy relative to the European stock market.

Why does global growth matter more than domestic growth for European companies?

Country exposure also helps to explain the divergence between European earnings and the domestic economy. Listed companies now generate most of their revenues outside their country of domicile, and the euro area’s share of STOXX 600 sales has fallen from more than 60% in 1990 to about one-third today.

At the same time, exposure to the US, Asia, and emerging markets has increased steadily, Bell observes.

“With more than half of STOXX 600 revenues now generated outside Europe, global rather than domestic growth is increasingly more relevant for listed companies.”

Goldman Sachs Research captures this with sales-weighted GDP growth, which weights regional growth by the geographic breakdown of companies’ revenues in the prior year. This measure has exceeded euro area growth in most years since the early 2000s. It is also the dominant driver of earnings: A 1 percentage point acceleration is associated with roughly 10 percentage points of higher STOXX 600 EPS growth.

Currency also matters. A weaker euro raises the translated value of overseas profits, a meaningful share of which is denominated in US dollars, and improves the competitiveness of European companies.

Can higher energy prices support company earnings?

Europe is a net energy importer, so higher prices squeeze households and raise corporate costs. But the economy's sensitivity to oil prices has declined as the euro area economy has become less dependent on oil.

The market's composition also provides a cushion: companies involved in energy and basic resources benefit directly from higher commodity prices, while chemicals companies and many industrial companies can pass costs on to customers.

The cushion may not last. Sustained high energy costs can weaken company profit margins as growth and pricing power fade. The negative impact of higher costs can take time to appear in margins: After the 2022 energy shock, earnings for energy companies rose quickly while easing supply bottlenecks supported autos and chemicals companies; six to 12 months later, earnings estimates for energy and chemicals companies began to fall as commodity prices normalized and cost pressure became more visible.

The current Middle East shock could follow a similar sequence, with margins outside financials and commodities coming under pressure if demand slows and pricing power fades.

Given that our economists do not expect significant changes in euro area economic growth momentum, Bell’s team is more cautious than the consensus of financial analysts when it comes to European companies’ profit margins. Goldman Sachs Research forecasts broadly flat margins for STOXX 600 companies until 2028 after financials and commodities are excluded. On the other hand, the consensus of analysts expects margins to expand by more than 100 basis points to 10.1% from 8.7%.

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