MSCI Europe Companies Have Entered a New Phase of Earnings Growth

Since last year, earnings expectations for MSCI Europe companies have risen markedly. Expected earnings per share over the next 12 months have increased by 18% since April 2025, reaching an all-time high. This marks a sharp contrast with the muted earnings growth recorded by European companies since the end of 2022.

Our analysis

This reflects a major strategic shift in Europe, with less emphasis on consumer protection and a greater focus on business and investment. This includes a more accommodating approach to antitrust enforcement, more pragmatic protectionism in response to Chinese competition, and a more assertive industrial policy.

At the same time, Europe is undertaking an unprecedented investment push – worth several hundred billion euros – in Germany and European defense. In our view, these shifts could continue to shape the outlook in the years ahead.

Over the past 12 months, rising earnings per share have been a powerful driver for European equities, while keeping valuations reasonable. The P/E ratio for MSCI Europe was 15.2x as of August 31, 2026, close to its long-term average, while its valuation discount relative to MSCI USA remained at around 25%.