Australia’s top listed companies return to earnings growth after years of declines as US tech pushes ahead

Australia’s listed corporations snapped a three-year streak of declining earnings this profit season, but their gains lagged those of their global peers, particularly in the US tech sector.

“It was quite a soft earnings season,” VanEck senior portfolio manager Cameron McCormack told AAP.

Australia’s benchmark S&P/ASX200 index - which reflects most of the companies that reported in August - only marginally beat expectations, although small and mid-sized companies did better.

But the materials sector grew earnings by nearly 30 per cent, and was amongst the best sectors in terms of exceeding expectations.

“A key driver was really strength from goldminers seeing an increase in profit margins coming through, and also particularly exposures to copper miners as well, given that both gold and copper had reached an all-time high,” Mr McCormack said.

Results from the banks - even though Commonwealth Bank was the only major that reported - were actually “quite solid” despite their forward earnings guidance being a bit weaker.

A key takeaway was that new mortgage applications were down around 15 per cent following federal government housing-related tax changes announced in May, Mr McCormack added.

Overall earnings growth was driven mostly by Australia’s resource sector, Morningstar market strategist Lochlan Halloway agreed.

“If we think about the two main stories of earnings season, it’s like resources stocks, and everything else,” he told AAP.

While the miners collectively grew earnings by around 30 per cent, most industrial companies and banks’ earnings climbed by just mid-single digits.

“That’s barely ahead of inflation,” Mr Halloway said.

Mr Holloway did give credit to Woolworths for a standout performance, flipping the narrative from a year ago when Coles seemed to be gaining ground on its larger rival.

But overall earnings growth for Australian companies was lacklustre compared to the United States.

Wall Street’s Nasdaq-100 index - which reflects technology companies like Nvidia, Apple, Amazon and Tesla - grew earnings by 38.8 per cent in 2025/26.

AMP deputy chief economist Diana Mousina was a bit more enthusiastic about Australian companies’ results this season, although she acknowledged that earnings growth was quite limited and came mostly from the resource sector and banks.

“This is the best earnings season that we’ve had in three years, so there are still some positives there,” Ms Mousina said.

Thirty-six per cent of companies beat earnings expectations, which is a bit below the long-run average, but also fewer companies missed them, Ms Mousina said.

“There are more companies just performing in line,” she told AAP.

Two-thirds of companies reported they would pay a dividend, a figure that’s up from a year ago and better than the long-run average.

“So overall, I’d say it was fine, and the good news is that we are seeing stronger earnings growth in Australia, but it’s just not enough to compete with some of our global peers at the moment,” she told AAP.

Tim Johnston, portfolio manager at Bell Asset Management, was more sanguine about the smaller end of the market that he favours.

“The reporting season was better than the weak expectations going in,” he said, adding that 80 per cent of smaller companies had either met or beaten expectations.

Earnings growth in the small cap market is forecast at about 13 per cent or 14 per cent over the next couple of years, compared to low single-digit growth for large cap companies, according to Mr Johnston.

Morningstar’s Mr Halloway also pointed out that Australia’s resource sector shouldn’t get too much credit for growing earnings, given that the higher commodity prices that worked in their favour are beyond their control.

“I think that the challenge for Australia’s stock market is very much sort of the challenge that we have in our economy more broadly, which is how do we get productivity to rise so we get the economy growing in real terms again,” he said.

Australia hasn’t had a big productivity-boosting technological revolution yet, which explains why its corporate earnings haven’t grown as much compared to the United States, Mr Halloway said.

“But let’s hope that Australia can start to implement and reap the rewards of the AI revolution, so we can start growing again.”