Australia’s earnings revival

Key takeaways

• FY26 earnings expectations for the S&P/ASX 200 have surged from 5.6% to 13.6% during the reporting season, representing a dramatic reset after two years of negative earnings growth¹.
• A sharp rebound in materials and a strong showing from the major banks underpinned the upgrade, reflecting broad strength across Australia’s heavyweight sectors.
• High yield and value factors led the market over the reporting period as investors rotated toward cash flow certainty and away from growth amid heightened volatility.

At the start of 2026 analysts were expecting the S&P/ASX 200 to grow earnings at 5.6% for the FY26 financial year. Following the February corporate reporting season these expectations now sit at 13.6%². For context, the US’s enviable S&P 500 just reported annual earnings growth of 14.2% during Q4³.

Coming off two consecutive financial years of negative earnings growth and trading at historically elevated valuations, the ASX’s turnaround is a welcome relief and nothing short of remarkable. Of course, base effects from the earnings declines in recent years contribute to a lower bar, but the magnitude of the turnaround shouldn’t be understated.

Banks and miners pulling their weight

It should be no surprise that such a result would require both Australia’s large cap banks and materials companies to pull their weight – given how significant their share of overall market capitalisation is.

The materials sector was the biggest swing factor. Having suffered a collective 18.0% earnings decline last financial year, ASX200 material’s companies are forecast to grow 33.2% in FY26⁴.

Source: Refinitiv. As at 2 March 2026. Actual results may differ materially from forecasts.

BHP’s historic results saw copper overtake iron ore as the largest earnings contributor for the first time ever, representing 51% of group earnings. The surge in critical mineral prices alongside record highs for gold were also significant contributors to the sector’s earnings through mid- and small-cap miner’s earnings.

Meanwhile, strong credit growth, rising net interest margins, and benign bad debt across the majors saw a rebound in the big bank’s recent fortunes. CBA’s record cash net profit set the tone and saw shares jump 8.4% on the day. The strength of results has been reflected in forward estimates – financials sector FY26 earnings expectations have increased from 1.4% at the start of the year, to now sit at 9.5%⁵.

Earnings volatility remains elevated

The season did not come without its losers. In fact, on average earnings misses were punished by three times as much (-6.3%) as beats were rewarded (+2.1%)⁶. This increasing earnings volatility has been a growing trend after the prior August 2025 reporting season saw 46% of stocks moving +/- 5% on earnings, the highest on record. With the ASX trading on historically elevated valuations investors have little appetite for bad news.

Consumer discretionary was a mixed bag – confirmation that the Australian consumer is still spending, but selectively. JB Hi-Fi was the sector standout, with record sales, profit growth and a 23.5% lift in its interim dividend. But the sector also captured the reporting season’s asymmetric return profile with results not needing to be bad to be punished, they just needed to fall short of increasingly high expectations. Harvey Norman fell 9.0% on a small miss as they flagged a tougher consumer environment following the recent interest rate hike.

With reporting coming in the midst of a global AI induced software sell off, Australia’s technology names were already in the crosshairs. In this environment, good results were simply not enough. Pro Medicus delivered 30% underlying profit growth and $280 million in new contracts, yet fell 20% on the day after a 2% revenue miss driven by contract timing. Zip Co, despite reporting EBITDA growth of 86%, saw a third of its market cap erased on flat second-half guidance. 

High yield and value factors outperform as investors reward capital returns

The earnings season also saw a continuation of the high yield and value factors outperforming in the Australian market. HYLD S&P Australian Shares High Yield ETF and QOZ FTSE RAFI Australia 200 ETF factor ETFs returned 6.7% and 6.0% respectively in February, with the S&P/ASX 200 returning 1.3% over the period⁷ (HYLD and QOZ returns for 1 and 5 years are set out below). Telstra, Woodside and AGL were among the top contributors as investors rotated toward predictable cash flows amid AI-driven volatility in growth stocks.

Overall, the season was a positive indication of strength in corporate Australia. Capital returns highlighted this, with boards using stronger balance sheets to reward shareholders directly. Dividends per share rose 2.1% to $93.5 billion across the index. Eighteen new buybacks were announced totalling $3 billion – a record for a December half-year reporting season, against a pre-season expectation of just 10, according to MST Marquee. The biggest came from Dexus ($725m) and BlueScope ($310m).

Source: Bloomberg. QOZ shows fund performance net of QOZ’s management costs of 0.40% p.a. HYLD shows index performance (not actual fund performance) net of HYLD’s management costs of 0.25% p.a. HYLD’s index is S&P/ASX 200 High Yield Select Index. HYLD’s inception date was 1 August 2025. Past performance is not an indicator of future performance.

Sources:

1. Source: Refinitiv. As at 2 March 2026. Actual results may differ materially from forecasts. ↑

2. Source: Refinitiv. As at 2 March 2026. Actual results may differ materially from forecasts. ↑

3. Source: Factset. As at 27 February 2026. Actual results may differ materially from forecasts. ↑

4. Source: Refinitiv. As at 2 March 2026. Actual results may differ materially from forecasts. ↑

5. Source: Refinitiv. As at 2 March 2026. Actual results may differ materially from forecasts. ↑

6. Source: Morgan Stanley research. ↑

7. Source: Bloomberg. 31 Jan 2026 to 27 Feb 2026. Past performance is not an indicator of future performance. ↑