Q1 Earnings Season Recap: Corporations continue to draw the gross margin levers

As Q1 earnings season draws to a close, we reflect on the primary issues discussed in our Q1 earnings preview. First, we questioned whether earnings would surpass low expectations, given analysts' projections of a modest 3% year-over-year increase—the weakest growth since the COVID-19 pandemic. Second, we examined the progress of AI: its impact on results and the ability of companies to monetize this technological revolution. Lastly, we considered the resilience of consumer spending.

Entering earnings season, equities faced some pressure, with the S&P 500 reaching an all-time high of 5333 on April 1 before experiencing profit-taking. The index dipped to 4963 on April 19 due to escalating geopolitical tensions between Israel and Iran. However, equities have nearly recovered all those losses over the past four weeks, partly buoyed by better-than-expected earnings results. In this report, we delve into the key themes and company performances from Q1. One thing is certain: U.S. corporations continue to demonstrate their ability to pull levers to maintain profits, much to the interest of investors.