Bank of America says the pace of companies trimming guidance in Europe has slowed to a five-year low, even as executives voice caution about near-term uncertainties tied to geopolitical tensions and the potential for energy-price shocks.
In a research note, BofA strategist Paulina Strzelinska reported that "the Q4 '25 earnings season has delivered 16 guidance cuts and 3 profit warnings, the lowest since Q1 '21." That count sits alongside an improved proportion of firms raising forecasts. Strzelinska highlighted that "the ratio of upgraded guidance to total revisions stands at 0.63, the highest since the Q2 '23 season."
"The Q4 '25 earnings season has delivered 16 guidance cuts and 3 profit warnings, the lowest since Q1 '21," BofA strategist Paulina Strzelinska said in a note.
Despite the relatively small number of downward revisions so far, companies surveyed by the bank have not dismissed emerging risks. Many told analysts that it is still premature to judge the operational consequences of the escalation of conflict in the Middle East - and that any effect will depend on how long the disruption endures.
Among the exceptions cited by BofA was airline Wizz Air, which warned that the conflict could depress its results. The company flagged a potential hit of
BofA also considered how a pronounced increase in energy costs would ripple through consensus earnings. In its scenario where energy prices rise by 50%, the bank concluded that consensus 2026 earnings per share for European equities would be trimmed modestly: the Europe Stoxx 600 estimate would fall by about 1.7% and the MSCI Europe estimate by roughly 3.8%.
Within that hypothetical exercise, BofA identified the largest sectoral exposure to higher energy input costs in Construction & Materials, Travel & Leisure and Utilities. The bank noted that Spain and stocks with significant global exposure could also face some of the most pronounced earnings effects from elevated energy prices.
On flows, BofA reported continued net inflows into Europe-focused equity funds, recording $0.82 billion of incoming capital last week. The bank said passive funds continued to attract the majority of demand, while active funds experienced further outflows.
For market participants, the combination of fewer guidance cuts and a higher share of upgrades offers some near-term reassurance on corporate outlooks. At the same time, company commentary and the bank's scenario analysis underline that exposure to geopolitical disruption and volatile energy costs remains a source of earnings uncertainty for particular sectors and regions.