For Traders from Club iNSIDER: German Large-Cap Companies – Overly Optimistic Expectations for Earnings Recovery in 2026

Earnings per share (EPS) forecasts for the DAX in 2026 are vulnerable as structural obstacles persist.

The DAX is likely to fall short of the consensus 14% EPS growth in 2026, as a revenue expansion of only 4% seems overly dependent on margin recovery from automakers like BMW, facing structural challenges in electric vehicles, even if cyclical demand rises. Competitors in the defense sector and AI-related companies are expected to see steadier growth, but U.S. tariffs and currency hurdles could slow broader recovery. (November 25, 2025)

1. EPS recovery expectations are shifting to the second quarter, with muted sales growth

According to Consensus, a 14% EPS growth for large German companies appears ambitious, with limited revenue expansion leaving most of the heavy lifting to minimal recovery. Excluding insurers to smooth volatility, expected revenue growth is only 1–3%, accelerating to 8% in Q4. In contrast, double-digit EPS growth is expected from Q2 onward, driven by the automotive and industrial sectors. Pervasive risks include currency fluctuations, weak demand and pricing, and U.S. tariffs.

Companies exposed to modern defense (Rheinmetall, Airbus, MTU Aero Engines) and AI/cloud services (Deutsche Telekom, SAP) are expected to contribute 15% of first-half EPS, supported by Germany’s fiscal stimulus and EU multiyear defense investments. Deutsche Telekom’s partnership with Nvidia in AI cloud services strengthens its position in the expanding European AI ecosystem. (November 25, 2025)

DAX EPS, quarterly sales growth (excluding insurers)

2. Profits of German industrial companies are affected by currency and export constraints

The profit outlook for German industrial companies, a key driver of DAX 2026 EPS growth, depends on export recovery supported by a weaker euro and easing political uncertainty. EPS growth in the sector has roughly a 40% positive correlation with exports to the U.S. and Asia, highlighting significant exposure to both regions. Domestic and EU-driven demand, fueled by Germany’s infrastructure investments and Europe’s rearmament ambitions, could help offset weaker Asian orders if China’s recovery remains sluggish.

Exports from Germany are projected to grow by only 1% in 2026, with most of the recovery expected in the second half of the year. U.S. tariffs remain a major threat, as companies like Daimler Truck (earning over 40% of revenues in North America) still face a 25% duty, which could reduce 2026 EBIT by up to 30%, according to automated calculations by Bl. (November 25, 2025)

German exports to the U.S. and Asia vs. industrial companies’ EPS

3. Margin recovery in 2026, driven by the automotive sector, is not guaranteed

DAX margin recovery in 2026 appears vulnerable, as it heavily depends on German automakers BMW, Mercedes, Porsche, and VW, which continue to face structural challenges even if cyclical demand improves. BI automotive analysts estimate that German automakers’ EBIT margins could recover to 5–9% in 2026 from 3–7% in 2025, driven by cost savings and AI-based efficiency improvements. However, persistent pricing pressure from Chinese competitors and the risk of heightened trade barriers between the EU and China could limit progress.

The German consumer goods sector (mainly automotive), materials (primarily chemicals), and communications services may require stronger operational leverage or lower financing costs to meet consensus EPS targets. This is because only 2–3% revenue growth and a 50–150 basis point margin improvement are insufficient to justify the double-digit profit forecast. (November 25, 2025)

EPS growth in 2026 according to consensus vs. derivative data

4. DAX profit momentum for 2026 lags behind European peers

DAX profit momentum has yet to stabilize, with Q3 results showing currency headwinds, pricing pressure, and higher tariff costs that are likely to continue into next year. Among the weakest trends in Europe are the 2% downward revisions to 2026 EPS estimates over the past three months. Downgrades continue to outpace upgrades, led by Siemens (currency and margin pressure), Daimler Truck (U.S. tariffs), and the weak automotive market backdrop weighing on automakers and upstream suppliers such as BASF and Infineon. Improvements at Deutsche Telekom, Deutsche Bank, and Siemens Energy only partially offset these pressures.

The revision trend for defense-related stocks has slowed, with MTU Aero Engines’ estimates remaining unchanged despite guidance at the top end of its 2025 EBIT range, suggesting limited scope for upgrades without new catalysts. (November 25, 2025)

Profit momentum of European large-cap companies for 2026

5. Consensus: DAX EPS +14% in 2026 vs. +11% for Stoxx 600

Despite the challenges, analyst consensus continues to expect stronger EPS growth for the DAX compared with the European benchmark Stoxx 600.
Bloomberg Intelligence, however, believes the DAX’s valuation may remain overly optimistic if margin improvement fails to materialize.

DAX, SXXP: Sales and EPS growth (2023–2027)

6. DAX EBIT margin set to rise by more than 100 bps in 2026, but with significant risks

The expected margin expansion comes mainly from automotive and industrial companies – precisely the sectors with the largest structural risks.
This makes the market’s valuation highly sensitive to macro shocks (trade conflicts, currencies, commodities, EV regulations).

DAX (ex-Financials): Operating Margin (2014–2027)

Source: Bloomberg Terminal